NEDA asked for guidelines on which infrastructure projects are suitable for PPP

THE PPP CENTER has asked the National Economic and Development Authority (NEDA) to come up with guidelines for assessing the best mode to implement infrastructure projects after the government said it favors “hybrid” methods of financing projects instead of public-private partnerships (PPPs). The PPP scheme -- the centerpiece infrastructure program of the previous government that hoped to tap the private sector’s expertise and resources -- has taken a back seat under President Rodrigo R. Duterte, who has made infrastructure a centerpiece of his economic program. His officials have said the PPP mode of procurement takes too long to implement such projects. Instead, the present government prefers them to be funded internally, through official development assistance (ODA), PPP or a mixture of these modes. “There is no default best option and the choice has to be evaluated on a case by case basis. The PPP Center had requested NEDA to have an interagency group establish the said evaluation methodology,” the PPP Center said in a statement on Thursday. “Whether a project should be pursued through government funding, ODA, PPP, or hybrid is a matter of finding the solution that best meets the government’s objective given a set of constraints, and the risks presented by each option.” The PPP Center said if the objective is to build quickly, then public funds will take up the burden. “However, if the capability of a government agency to implement the project is constrained, then PPP or ODA would be the next best options.” “PPPs bring in the private sector’s expertise while ODAs harness a particular donor’s capabilities,” it added in its statement. The agency noted that another constraint, should government be the one to build infrastructure, is its ability to raise funds through taxes or borrowing. “If this constraint exists, then PPP could be a better option. But this has to be weighed against the government further taking on contingent liabilities. The current hybrid model refers to construction of infrastructure using public funds or cheaper financing (local borrowing and ODA) and the subsequent operations and maintenance using PPP,” it said. The PPP center earlier said implementing infrastructure projects through the PPP scheme “remains a viable option,” especially those that require an integrated approach -- design-build-operate-maintain -- in order to save on procurement timing, reduce interface risks and avail of the private sector’s technology and efficiency. The government recently decided to abandon the PPP mode of procurement for regional airport projects, with the implementing bodies -- the Department of Transportation (DoTr) and Civil Aviation Authority of the Philippines -- deciding they “would be implemented through other modes.” “If the objective is to deliver public service of the required quality and lowest cost, then either the hybrid model or integrated PPP (build-operate-maintain) would be better options. The hybrid model works if the infrastructure is built and equipped to enable the delivery of the services expected from the O&M (operation and maintenance) provider,” the PPP Center said. “The active management of this conflict between builder and O&M provider in a hybrid model has to be planned, as soon as a decision to go hybrid is made. Conflict management, if done post construction, could potentially entangle the government, the builder and the O&M provider in costly finger-pointing should problems in the infrastructure or in service delivery later arise. This is in fact already happening in some hybrid projects,” it added. The PPP Center further said that compared with the integrated build-operate-maintain PPP model, “the private partner manages this kind of conflict and assumes responsibility for the performance from construction all the way to operation and maintenance” and that the government only has to deal with one party -- an important considerations when choosing between hybrid and integrated PPP. Among the PPP projects that are completed are: Daang Hari-SLEx Link Road (Muntinlupa-Cavite Expressway) Project, PPP for School Infrastructure Project Phase-I, Automatic Fare Collection System, and the Ninoy Aquino International Airport (NAIA) Expressway Project (Phase II). PPP projects under construction are: PPP for School Infrastructure Project-Phase II, Mactan-Cebu International Airport Passenger Terminal Building, Metro Manila Skyway Stage 3, Southwest Integrated Transport System Project, MRT Line 7, Bulacan Bulk Water Supply Project, and the Civil Registry System-Information Technology Project Phase II.       Source: bworldonline