New policy framework for the PPP initiative

PETER TURNQUEST, Deputy Prime Minister and Minister of Finance

Contributor: Ministry of Finance

The government has established a formal policy for public private partnerships (PPP) that sets out clear definitions and terms to govern the process of identifying, screening, procuring and managing PPPs, including how to treat unsolicited proposals.

Deputy Prime Minister K. Peter Turnquest noted, “In the past, the term PPP has been used in broad, often metaphorical terms to account for any number of projects, including those categorized as joint ventures, management contracts and even simple vendor-financed transactions that represented essentially short-term loans to the government. With the new policy, the government specifically defines a PPP as a relationship between the government and a private sector entity or consortium designed to introduce private sector resources and expertise into public infrastructure projects.”

The intended use of a PPP is to implement priority investment and infrastructure projects that are aligned with the government’s development objectives, where doing so is expected to provide the best value for scarce resources.

Turnquest continued, “The government is looking at every possible avenue to limit its borrowing, constrain its debt while meeting its financial obligations. The reality is, meeting The Bahamas’ infrastructure needs is beyond the fiscal capacity of the government alone, given the geographic dispersion of the islands, coupled with low population densities of the Family Islands and higher than average infrastructure costs. These factors create particular challenges with regard to policy, management and maintenance of public infrastructure.

“To address these challenges, the government recognises, the private sector has financial and technical resources that can be mobilised to help provide high-quality, responsive, resilient, and sustainable public assets and services in a way that achieves value for money for the government and public users.”

While it is not new for the government to use PPPs to advance its policy objectives, the government has taken responsible action to develop a formal policy and move away from the ad hoc approve of previous governments. The PPP Policy will inject a new level of transparency and accountability to the regulation of PPP projects, creating a standard set of objectives and criteria for the identification and screening of projects, for the procurement of PPP partners and the management of PPP projects. In a climate of fiscal restraint, a formal policy also ensures that the fiscal impact of all PPPs is not only well understood, but in line with the government’s legal obligations to fiscal responsibility.

The new PPP Policy provides guidelines for reviewing unsolicited PPP proposals from the private sector; however, its primary focus is public investments that have been identified and prioritized by the government in order to close critical infrastructure gaps that stifle medium and long-term growth and social development. The policy creates flexibility in structuring PPPs by allowing for a variety of contract types.

Turnquest said, “Partnerships of this nature undertaken by the government must go through a rigorous accountability process because we are talking about using public money on major infrastructural projects that have profit incentives built in for private sector partners. This is not the private sector where you can make snap decisions and do what you want, when you want because it is your own private money.

“These are public investment projects and there is no shortcutting the accountability process. It must have transparency and it must be open and fair, and it must be fiscally responsible. That is why a policy is necessary and that is why our policy establishes these as guiding principles along with value for money, environmental and social sustainability, partnership and inclusiveness.

“We have created a streamlined process that is fair and transparent with essentially only three stages: 1) Project Identification and Screening; 2) Business Case Analysis; 3) PPP Procurement. The oversight and management structure has four reasonable tiers: 1) Sector level/project specific management teams; 2) overall PPP Operational Unit at the MOF; 3) oversight bodies responsible for all approvals in the PPP Steering Committee and Cabinet. “This creates the needed checks and balances for responsibly managing public money, and protects the return on investment for the Bahamian people.”

“It is important to note as well that although the policy sets guidelines for the ideal size of projects and the nature of same, the government will retain its right to exercise flexibility on project types and project sizes that it will consider and make exceptions when warranted. The primary ambition is to engage the private sector in a way that makes optimal use of public resources toward public sector goals.”

“I emphasize the point because I want to encourage all Bahamians who may have a project idea that may not fit into the prescribed scope to STILL come forward with their ideas and plans. If they fit into the guiding principles of the PPP framework and the project makes sense for the Bahamian people, the government will be prepared to give consideration to it,” Turnquest concluded.

Key Takeaways:
Partnerships (PPP) Policy
1. Identifying priority public investments and service needs in a given sector is primarily the responsibility of the Ministry, Department, or Agency (MDA) responsible for that sector.

2. PPPs are viewed as public investment projects, which mean the public infrastructure projects under consideration are expected to deliver better value for money to the government if implemented as PPPs.

3. PPPs will be used to develop new assets and services primarily in seven economic sectors: i. Electricity generation and distribution, including the development of Renewable Energy (RE) sources, in the Family Islands; ii. Ports; iii. Airports; iv. Roads and bridges (i.e. toll bridges and roads); v. Information and Communications Technology (ICT); vi.Urban renewal; and vii. Government buildings and facilities with independent income generation.

4. The PPP procurement framework is structured to preserve competitive pressure, transparency, and fiscal discipline. This will allow the government and public users to achieve the best terms and conditions that deliver value for money. It will be consistent with The Bahamas’ relevant procurement law or regulations.

5. Unsolicited proposals that are demonstrated to be of public interest will be considered, but only under a framework that preserves competitive pressure, transparency, and fiscal discipline, which under normal circumstances includes an open procurement process where other qualifying firms will be allowed to bid.

6. The government agency implementing a PPP project may be a Ministry, a State Enterprise, a Statutory Body, or any other government contracting authority in any sector. The private party to a PPP contract may be any majority privately-owned company or consortium domiciled domestically or abroad.

7. The nature of a PPP contract may vary; but involves the private sector bearing significant risk and management responsibility for the delivery of a public asset or service.

8. The PPP procurement process will adhere to a strict set of standards, including open market consultations, national and international publication, equal access to data, transparency and the right to appeal.

9. PPPs will be presented to Cabinet for approval at three stages: As a Business Case Report in the early project screening stages; asa set of Open Bid Contracts Documents prior to the issue of aRequest for Proposals; and as a PPP Contract, after the procurement process has been completed. A PPP Steering Committee, consisting of Permanent Secretaries will present these documents to the Cabinet, supported by the management teams responsible for developing and implementing PPP projects.

10. The management of the PPP Programme will fall on the Ministry of Finance through a dedicated PPP Operational Unit. This unit will be formed over time once the demand for such projects warrants same. Prior to the formation of this unit, the evaluation of PPPs will be facilitated by a committee to be formed by the Ministry. The committee and eventually the Unit will be responsible for: 1) developing Project Concept Notes and advising the Steering Committee on projects that should be advanced by the government; and, 2) setting up sector level PPP Project Teams for each project selected for implementation as a PPP. The Project Teams willdraft the Business Case Reports and the project agreements; supervise consultants, prequalify bidders and conduct the procurement process.

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