APPRAISING THE SOCIAL COSTS AND BENEFITS OF TRANSPORTATION PROJECTS USING PPP

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APPRAISING THE SOCIAL COSTS AND BENEFITS OF
TRANSPORTATION PROJECTS USING PPP
42nd IAHS WORLD CONGRESS The housing for the
dignity of mankind 10-13th April 2018 Naples,
Italy
Dr .Maha Mustafa Eltahir1 , Eng. Muna Omer Ali2 ,
Eng Mohammed Siddig3 1 Road, Bridges and
Drainage Corporation - Ministry of
Infrastructures and Transportation Khartoum
State - P.O.Box 818 - Khartoum -
SUDAN E-mailmahaeltahir_at_hotmail.com Linkedin
https//www.linkedin.com/pub/maha-mustafa-eltahir-
ibraheim-dr/42/88a/673 2 Road, Bridges and
Drainage Corporation - Ministry of
Infrastructures and Transportation Khartoum
State - P.O.Box 818 - Khartoum -
SUDAN E-mailHas-ooba_at_windowslive.com 3 (Msc.
Student Karry University) E-mailAlzoma76_at_gmail.co
m
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INTRODUCTION

• 1.1. An over view Of Public Private Partnership
• Public Private Partnership ("PPP") is a
  cooperation agreement between public and private
  sectors for rendering of public services that are
  traditionally provided by the state and funded by
  taxpayers, and is characterized by sharing the
  investments, risks, liabilities and revenue
  between the cooperating parties. In this model,
  public and private sectors complement each other
  by their respective individual distinctive
  features. The economic challenges associated with
  supplying fundamental public services, i.e.
  healthcare, are shared with the private sector in
  order to assure public welfare.

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INTRODUCTION

• Advantages of the PPP model have enhanced it as a
  prominent and commonly used model in many
  countries. The PPP model, which was first adopted
  in the United Kingdom in 1990s, has then been
  applied in transportation, education and
  healthcare sectors both in other European
  countries (such as Ireland, Portugal, Spain,
  France, Italy and the Netherlands) and in other
  parts of the world (such as Australia, Japan,
  Canada and Latin America).

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1.2 Benefits of PPPs

• .
• PPP offers an alternative approach by public to
  projects that are traditionally financed and
  operated by the state. Financing provided by the
  private partner allows faster and efficient
  construction of big-scale projects, which might
  otherwise get caught in the fishing net that is
  the state's budget.
• As opposed to a state granted concession, PPP
  creates partnerships formed through negotiations
  held between equals thus the ability to more
  transparently and impartially determine, address
  and calculate risks and returns. When well
  structured, PPP helps addressing specific costs
  and investment challenges, creates improvements
  in efficiency i.e. improved service qualities
  (expertise, new technologies, a potential to
  attract and retain better performing staff) and
  low cost management1.

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1.3 Risk Management

• .
• One of the most appealing aspects of PPP is
  sharing of risks related to the projects between
  the partners. While the "Build - Operate -
  Transfer" scheme limits the operational exposure
  and risk of the private sector to a relatively
  shorter period of time, the private investor in a
  PPP project is bound to be extra diligent when
  assessing its longer-term risks for financing,
  construction, quality of service, and
  maintenance. On the other hand, especially in the
  healthcare sector, long-term costs related to
  quality of service and maintenance can be quite
  difficult to foresee, and thus, may add up to an
  unknown variable while calculating future
  exposure. Therefore, contractual flexibility and
  giving the private investor breathing space
  especially during the construction phase through
  adjustment mechanisms are essential if the aim of
  the state is to attract top-tier
  domestic/international private partners.

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1.4. Comparative between PPPsothertypeofcontracts

• The main difference between PPP projects and
  procurement (also "Build - Operate - Transfer"
  projects) is that in PPP projects, private sector
  incomes are linked to the performance of the
  assets, including the proceeds generated by
  services, which forces the private sector to
  maintain a successful operation throughout the
  term of the partnership. Since payments to the
  private partner are made by the public following
  the delivery of the project, the private sector
  contractor has an actual benefit in making sure
  that the contracted asset is delivered in due
  time, and services meet the committed quality,
  which was also mentioned by the HM Treasury
  "Private sector expertise and experience has
  always been utilized in public sector
  procurement, but, where in traditional
  procurement, private companies built and then
  walked away, PFI seeks to ensure that the private
  sector takes responsibility for the quality of
  design and construction it undertakes, and for
  long term maintenance on an asset, so that
  value-for-money is achieved. As a summary, the
  advantages and key challenges of PPP projects can
  be stipulated as follows

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1.5 Advantages

• .
• Maximized use of private sector experience and
  skill
• Affordable projects
• Life cycle cost risk is undertaken by the private
  sector
• Budgetary certainty regarding the projects
• Ensured level of quality
• The state makes the payments to the private
  sector only upon the delivery of services
• Encouraging injection of private equity
• Lower long term use of state resources

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1.6. Key challenges

• Inability to transfer absolute risk
• State's inability to day to day control of the
  management of the services provided in PPP
  Projects
• Slow pace of the state's decision making and
  costly PPP projects
• The private sector has a higher cost of finance
• Lack of organizational focus on a state level
• Lack of flexibility in public sector (heavy
  bureaucracy) 4

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2. LITERATURE REVIEW

• 2.1 What Is Public Private Partnership?
•  
• 2.1.1 Public Private Partnership (PPP) is a form
  of procurement introduced in 2004 under the Best
  Sourcing framework. Best Sourcing encourages
  public agencies to engage private sector
  providers in delivering non-core government
  services if it is more efficient to do so. Public
  agencies can engage the private sector in many
  ways, such as contracting for manpower, service
  outsourcing or Business Process Outsourcing.
  Public Private Partnership (PPP) is another form
  of Best Sourcing that can be used to work with
  private sector to deliver services, particularly
  services that require the development of new
  physical assets.

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2. LITERATURE REVIEW

• 2.1.2 PPP refers to long-term partnering
  relationships between the public and private
  sector to deliver services. It is an approach
  that Government has adopted to increase private
  sector involvement in the delivery of public
  services.
•  
• 2.1.3 Conventionally, public agencies have only
  engaged the private sector to construct
  facilities or supply equipment. Public agencies
  will then own and operate the facilities or
  equipment to deliver services. For example, a
  public agency might engage private companies to
  build a water treatment plant. Upon completion,
  the public agency will own and operate the water
  treatment plant to provide water to the public.

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2. LITERATURE REVIEW

• 2.1.4 With PPP, the public sector will focus on
  acquiring services at the most cost-effective
  basis, rather than directly owning and operating
  assets.For example, if PPP is used to develop a
  water treatment plant, the private sector will be
  engaged to not only construct the plant, but also
  to design, operate, maintain and secure financing
  to build the plant to supply water to the public
  agency. Hence, instead of owning and operating
  the water treatment plant, the public agency
  purchases the water directly from the private
  sector. This means that the private sector has
  more room to introduce innovation into the
  delivery of public sector services.

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2. LITERATURE REVIEW

• 2.1.5 Under PPP, the private sector can look
  forward to providing a wider range of services
  and over a longer contract period (usually
  between 15 to 30 years). Through closer
  collaboration with the private sector, public
  services can be delivered in a more value for
  money way by making optimal use of the public and
  private sectors? expertise, resources and
  innovation to meet public needs effectively and
  efficiently1.
• The term PPP is sometimes used to describe a
  wider range of arrangements.as seen in PPP
  Schemes and Modalities box below3.

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Table 1, PPP Schemes and Modalities
No Modalities Schemes
1 Build-own-operate (BOO) Build-develop-operate (BDO) Design-construct-manage-finance (DCMF) The private sector designs, builds, owns, develops, operates and manages an asset with no obligation to transfer ownership to the government. These are variants of design-build-finance-operate (DBFO) schemes.
2 Buy-build-operate (BBO) Lease-develop-operate (LDO) Wrap-around addition (WAA) The private sector buys or leases an existing asset from the government, renovates, modernizes, and/or expands it, and then operates the asset, again with no obligation to transfer ownership back to the government.
3 Build-operate-transfer (BOT) Build-own-operate-transfer (BOOT) Build-rent-own-transfer (BROT) Build-lease-operate-transfer (BLOT) Build-transfer-operate (BTO) The private sector designs and builds an asset, operates it, and then transfers it to the government when the operating contract ends, or at some other pre specified time. The private partner may subsequently rent or lease the asset from the government.
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3. IMPORTANCE OF STUDY

• 3.1 Why PPP?
• PPP offers a win-win-win solution for the public
  sector, the private sector and members of the
  public1. For project also allows better
  screening of options, and helps in deciding
  appropriate project structure and choice of
  technology considering cost over the whole life
  cycle of

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3. IMPORTANCE OF STUDY

• 3.2 What is public-private partnership in
  infrastructure projects?
• Governments in most developing countries face the
  challenge to meet the growing demand for new and
  better infrastructure services. As available
  funding from the traditional sources and capacity
  in the public sector to implement many projects
  at one time remain limited, governments have
  found that partnership with the private sector is
  an attractive alternative to increase and improve
  the supply of infrastructure services.
• The partners in a PPP, usually through a legally
  binding contract or some other mechanism, agree
  to share responsibilities related to
  implementation and/or operation and management of
  an infrastructure project. This collaboration or
  partnership is built on the expertise of each
  partner that meets clearly defined public needs
  through the appropriate allocation of1
• Resources
• Risks
• Responsibilities, and
• Rewards
• It is important to emphasize here that a PPP is
  not a solution option to an infrastructure
  service problem but it is a viable project
  implementation mechanism for a preferred solution
  option.2

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3. IMPORTANCE OF STUDY

• 3.3. What advantages PPPs may provide?
• Governments worldwide have increasingly turned to
  the private sector to provide infrastructure
  services in energy and power, communication,
  transport and water sectors that were once
  delivered by the public sector. There are several
  reasons for the growing collaboration with the
  private sector in developing and providing
  infrastructure services, which include
• Increased efficiency in project delivery, and
  operation and management
• Availability of additional resources to meet the
  growing needs of investment in the sector and
• Access to advanced technology (both hardware and
  software).
• Properly executed planning and development the
  project 2.

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3. IMPORTANCE OF STUDY

• 3.4.ImportantCharacteristics Of PPP Projects
• Promise of better project structure and design.
• Allows better screening of projects. A bad
  project is a bad project no matter whether it is
  implemented by the public or the private sector.
• Better choice of technology based on life-cycle
  costing.
• Better service delivery, especially if
  performance based payment is considered.
• Better chances of completion on time and within
  the budget.
• Risk of default.
• Project risks can easily turn into government
  risks.
• Various liabilities on government (direct and
  indirect).
• A long-term contract management system needs to
  be in place.
• An administrative mechanism and special skills in
  the government are required to develop and
  implement PPP projects.2

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4. STATEMENT OF THE PROBLEM

•  
• 4.1 Research Objectives
• a. To ascertain the status of PPP in
  Sudan(Khartoum) through visibility study
  according to diligence key tasks as suggested
  below
• The key tasks in this stage include
• Project planning and feasibility
• Risk analysis and management
• Financing
• Value for money
• Pricing policy
• Government support
• Responsibilities of, and liabilities on
  government
• Regulatory arrangements
• Service and output specifications
• Setting the main terms of contract
• Getting the necessary government approvals2
• b. Analyze the efficacy of PPP in fostering
  service work

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4.2 Hypothesis

• a. Public private partnerships leads to improved
  service work.
• b. Public private partnerships do not necessarily
  improve public
  partner income.

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5. RESEARCH METHODOLOGY

• The identify the analysis process of the
  questionnaire that includes 120 samples out of
  the study community and 50 samples for some of
  the companies working in Khartoum, in order to
  determine the efficiency of Boot system in the
  development of the state.
• 5.1. Basic information
• 1- Project priorities.
• 2- The citizens views about basic services.
• 3- Types of funding and suggested resources.
• 4 -knowledge and adopting boot system.
• 5- Mechanism of payments.

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5. RESEARCH METHODOLOGY

• 5.2. Objective of study
• The case study is applied in order to identify
  the knowledge and appeal of the citizens of
  Khartoum state towards the concept of boot. Also
  the aim of this study is to realize the tendency
  of companies to share government for
  infrastructure solutions as private sector.
• 5.3. Citizens Questionnaire
• 1. The number of research samples of the
  questionnaire is 120 administered among different
  locations within Khartoum and distributes as
  schedule of local housing, special concentration
  on two areas of Soba Alhilla and Tutu having 25
  samples of each of the two areas as seen in table
  no (2).

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Table 2, living area
Locations Frequency
AL-Haj Yousif Soba Al-Hilla Al-Remella Al-Reyad Al-Kalaklla Al-Gooze Al-Lamab Al-Sajanna Al-Daim Burri Tuti Al-Muhandeseen Ombada 2 25 1 1 2 1 1 4 1 2 25 1 1
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Table 3, living area
Locations Frequency
Kafori Hay-Alzohor Abu Hanja Nabta Al-graifSharig Omdurman Abu Saad Almorada Al-Sahafa Gable Awlia BahriGarib AL-Khartoum Bahri Al-Thora Shambat Al-Kadaru AL-Halfaia Total Missing System Total 1 1 1 2 1 8 1 1 1 2 1 4 2 1 1 1 114 6 120
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5. RESEARCH METHODOLOGY

• 2- Jobs awareness is of greater importance where
  52 engineers were,20 accountants,12 doctors,14
  labourers,2 consultant and specialists,6
  governmental employee ,7 company administrators
  and 1 computer operators .It is noticed that the
  number of year of experience more than 5 years
  and their total samples is 87 see Fig (1).

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Fig. 1,Comparison of years of experience of
participants
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5. RESEARCH METHODOLOGY

• 3. The citizens views about basic services
• As mentioned above of all samples that agree to
  the idea that roads, bridges and drainage in
  Khartoum state need improvement according to
  samples of 119. And it considered as of greater
  necessity as infrastructure projects and should
  be given priority in improvement. Important of
  any type of project has to identified according
  to users see Fig.(3). andIn comparing needs of
  whether maintenance or new projects to be given
  the property the (highest) degree of new
  establishment is 91 samples,

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Fig. 2, Degree of importance of infrastructure
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Fig. 3,Mechanism of payments
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5.4. Mechanism of payments

• A study is conducted about the type of funding of
  various in situations where samples were 17 banks
  funding and 80 samples for self funding and the
  rest for another unmentioned funding out of 120
  samples see Fig.(4)

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Table 4, samples positively respond and 16
negatively react
Frequency Percent
60.0 4.2 64.2 35.8 100.0 72 5 77 43 120 yes no Total Missing Total
8- Samples of 76 is divided between 59 samples
positively respond and 16 negatively react toward
taking part in development.
Percent Frequency Type of payment
52.5 35.8 8.3 96.7 3.3 100.0 63 43 10 116 4 120 Magnetic cards In cash through Other Total Missing System Total
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5.5. Questionnaire for the companies

• Questionnaire was administered for a sample of 51
  subjects of companies in Khartoum state in order
  to tackle knowledge and respond to the raised
  questions of concern. the companies sample were
  officially in Sudan and approved by relevant
  authorities of concern with percentage of
  registrations 100 and the width of the sample
  is 51 company all companies worked in Sudan and
  in Khartoum state .
• And companies are willing to adapt such contracts
  companies adopt boot system and percentage was
  100 for sample studied as the most effective
  system.Based on the samples views, how can
  relevant funding be feasible and a suggestion was
  introduced for 4 amounts of funding with Dollar
  were proposed as shown below in table (6).

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Table 6, Fund available
Fund amount Sample width Percent
47.1 33.3 11.8 3.9 96.1 3.9 100.0 24 17 6 2 49 2 51 20000000 30000000 40000000 50000000 Total Missing System Total
Internal roads pavement the number were the
highest that reach 21 out of the total samples
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Fig. 4, Order Prioritizes projects to improve
infrastructures
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Table 7, Types of investment
Frequency Percent
56.9 33.3 5.9 3.9 100.0 29 17 3 2 51 Valid 5 years 10 years 15 years 30 years Total
In the companies view does investment in boot
system good for development in Khartoum state ?
Result was 100 positively responded of all
samples
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6. RESULTS AND DISCUSSION

• Questionnaire for the public and company was
  conducted for the use of boot contracts
  specifically and generally for infrastructure
  projects. The questionnaire is a very good method
  of date collection maintained to respond to
  improve KHARTOUM state infrastructure in
  collaboration of both the public and private
  sectors.
• The questionnaire Samples was 120 samples from
  Citizens and 51 sample from companies. The
  citizen questionnaire contained a 8 questions out
  of 21 main question for Companies questionnaire.
  The Conclusion was the Infrastructure of Khartoum
  state need more development .A Number of 100
  agreed that the infrastructure of Khartoum state
  need more in work from companies to citizens. And
  The lack of knowledge of Financial system from
  citizen but the companies reach and 98 more
  knowledge of the system but they didnt
  participate in that system as well.

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6. RESULTS AND DISCUSSION

• companies to work in this system is clear but the
  lack of guarantee made them sustain their
  executing the system but the citizen had no
  problem in participate in reasonable price .a lot
  of countries consider this system as best safe
  solution from going throw any experiment from
  that type that have a benefits.
• The results obtained from questionnaire as well
  as acknowledging the obstacles properties of the
  implementation of the boot system in KHARTOUM
  state , summary and recommendations are thus
  included.
• 1- Currently infrastructure needs to be improved
  in all mostly all aspects of basic projects
  services .
• 2- Lack of funding systems and Boot system as
  well
• 3- Weakness of partnership among government and
  private companies.
• 4- There is a desire for the companies to take
  partnership with government.

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6. RESULTS AND DISCUSSION

• 5- Lack of laws that regulate partnership
  investment.
• 6- Lack of adequate warranty, guarantee and
  confidence.
• 7- The private sector lack bravery and bravery in
  introducing new in experienced system.
• 8- Boot is an effective system for state
  development.
• 9- Boot system is characterized by flexibility
  and rapid in development process /operation.
• 10- The priority for sanitation and drainage
  projects.
• 11- Relevant system is in operation.
• 12- Exceptional contacts regulations of the
  engineering and consultancy councils and their
  weak roles and lack of commitment.

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7. CONCLUSION AND RECOMMENDATION

• The results obtained from questionnaire as well
  as acknowledging the obstacles properties of the
  implementation of the boot system in KHARTOUM
  state. The recommendation for futures study are
  in the following points.
• The necessity for expansion of investment.
• Dare of private sector and endeared.
• Establishment educational program offer for boot
  via mass media forwarded to investors.
• Rules and regulations of establishment contracts.
• Carry out feasibility studies that figure out
  basic services.
• Arrange priorities for work in accordance work
  citizen's benefits.
• Activate invested studies and educational 16. In
  project finance, structured finance broadly means
  debt structured to fit the cash flow. The risk
  matrix in table 3 shows some examples of possible
  mitigation measures against the risks

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7. CONCLUSION AND RECOMMENDATION

• The political leadership should ensure public
  awareness of the relative costs, benefits and
  risks of PPP and conventional procurement.
  Popular understanding of Public-Private
  Partnerships requires active consultation and
  engagement with stakeholders as well as involving
  end-users in defining the project and
  subsequently in monitoring service quality.
• Roles and responsibilities should be maintained.
  This requires that procuring authorities, PPP
  units, the central budget authority, the supreme
  audit institution and sector regulators are
  entrusted with clear mandates and sufficient
  resources to ensure a prudent procurement process
  and clear lines of accountability.
• Ensure that all significant regulation affecting
  the operation of PPPs is clear, transparent and
  enforced. Red tape should be minimized and new
  and existing regulations should be carefully
  evaluated. B. Ground the selection of PPPs in
  Value for Money

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7. CONCLUSION AND RECOMMENDATION

• All investment projects should be prioritized at
  senior political level. As there are many
  competing investment priorities, it is the
  responsibility of government to define and pursue
  strategic goals. The decision to invest should be
  based on a whole-of-government perspective and be
  separate from how to procure and finance the
  project
• Carefully investigate which investment method is
  likely to yield most value for money. Key risk
  factors and characteristics of specific projects
  should be evaluated by conducting a procurement
  option pre-test. A procurement option pre-test
  should enable the government to decide on whether
  it is prudent to investigate a PPP option further
• Transfer the risks to those that manage them
  best. Risk should be defined, identified and
  measured and carried by the party for whom it
  costs the least to prevent the risk from
  realizing or for whom realized risk costs the
  least.

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7. CONCLUSION AND RECOMMENDATION

• The procuring authorities should be prepared for
  the operational phase of the PPPs. Securing value
  for money requires vigilance and effort of the
  same intensity as that necessary during the
  pre-operational phase. Particular care should be
  taken when switching to the operational phase of
  the PPP, as the actors on the public side are
  liable to change.
• Value for money should be maintained when
  renegotiating. Only if conditions change due to
  discretionary public policy actions should the
  government consider compensating the private
  sector. Any re-negotiation should be made
  transparently and subject to the ordinary
  procedures of PPP approval. Clear, predictable
  and transparent rules for dispute resolution
  should be in place.
• Government should ensure there is sufficient
  competition in the market by a competitive tender
  process and by possibly structuring the PPP
  programmer so that there is an ongoing functional
  market. Where market operators are few,
  governments should ensure a level playing field
  in the tendering process so that non-incumbent
  operators can enter the market.

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REFERENCES

•  
• 1 PUBLIC PRIVATE PARTNERSHIP HANDBOOK, VERSION
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• 2 A GUIDEBOOK ON PUBLIC-PRIVATE PARTNERSHIP IN
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  Division of ESCAP
• 3 INTERNATIONAL MONETARY FUNDPublic-Private
  Partnerships Prepared by the Fiscal Affairs
  Department(In consultation with other
  departments, the World Bank, and the
  Inter-American Development Bank) Approved by
  Teresa Ter-MinassianMarch 12, 2004 Executive
• 4 Article by G?nençGürkaynakEsq and
  TunçLokmanhekimELIG, Attorneys-at-Law