As PPP (Public Private Partnership) success stories hit the news, new entrants can be inclined to rush headlong without adequate preparation. However, an effective PPP rollout requires a few key ingredients. This article shares best practice from procuring agencies in the urban transport sector.
Ingredients for an effective PPP Delivery
(I) Defined objective and process
Whether it is higher patronage, safety, comfort or value for money – objectives should be defined at the onset. A strong vision, clear policy and adherence to local regulation will guide the structure and content of the tender.
Participants value certainty. Just as Rome was not built in a day, an effective PPP solution must be designed and nurtured over time. Procuring agencies should publicise an “intention to procure” at least 12 to 24 months in advance.
Short timeframes encourage existing players who know the lay of the land. In order to widen the playing field, more time is required at the pre-bid stage to encourage new participants. This is particularly relevant for the price-sensitive urban transport sector. The suggested timeline presented below will vary by mode of transport and complexity of the scheme. Manufacturers may need significantly more time if new technology is to be introduced.
Indicative timeline for procuring urban transport PPPs
European Union (EU) procurement rules require a minimum of 35 or 37 days from publishing a tender to submission with some variations allowed. In new markets such as parts of Asia, Africa and Latin America where socio-economic parameters are less easy to forecast, longer timeframes of 45 to 60 days are recommended. This will allow robust data collection and due diligence. Greenfield PPP projects requiring depots, busways or tracks perform better when design and construction guidelines are included to allow informed bidding.
(III) Output-based specifications
For public agencies, protecting taxpayers’ interest is the guiding force for specifications. However, there is a dichotomy in the desire for high quality at the lowest price. Many wonder if this is really achievable.
Should one play safe and keep it simple, or embrace an ambitious plan? There is no simple answer. Complex PPPs work when backed by strong regulatory frameworks. If one’s local environment is not quite ready it needs a pilot programme. An eye on technology is crucial lest specifications become obsolete before time.
Procuring agencies cannot completely eliminate the risk of default. However, checks through at pre-qualification and evaluation stages can provide comfort. Agencies such as DIMTS (Delhi cluster buses) offer protection to lenders by allowing substitution of an operator in the event of default. In a well-designed procurement, incompetent service providers should be weeded out during evaluation stages.
(V) Evaluation and Award
To ensure best use of taxpayers’ funds, the commercial and negotiation skills of procuring authorities must match these of bidders. Public bodies need should be able to justify investment in talented in their teams
Innovative techniques of price bid evaluation can discourage aggressive bids – perhaps a subject for further discussion. Mature PPPs allow quality to be explicitly included in the evaluation stage. Many construction contracts in London’s high-profile £14.8 billion Crossrail project were evaluated with price accounting for less than half the evaluation in weighting. Evaluation committees were suitably trained to allow fair awards.
Feedback Loops: Measuring customer satisfaction
Knowing the existing quality of any public transport service is the first step towards improvement. Periodical surveys are a must. The methodology must be clearly defined and samples must be statistically significant. In Singapore the Public Transport Council (PTC) conducts annual surveys that form the basis for stakeholder engagement. In London, TfL conducts both regular and specific surveys to plan and improve its services. Authorities can also use services of benchmarking associations like UITP.
In summary, let’s remember that public transport is for the ‘public’. The five key takeaways are:
- Clear policy and specification
- Timescales that encourage healthy competition
- Use of quality criteria to weed out poor performers
- Public bodies to strengthen their commercial, financial and negotiation teams
- Regular customer feedback to guide improvements
A procuring agency that operates with professionalism will attract serious players. Ultimately, all participants- operators, manufacturers, investors, the local body and customers are spokes of a big wheel. Their willingness to work together can turn aspirations into reality.
The author is a domain expert in urban transport and aviation PPPs. She has advises bidders, investors and authorities in Asia, Europe and Latin America. Views and opinions expressed are own. Ira.firstname.lastname@example.org