Development of Policy, Legal, and Insitutional Framework for - ppiaf

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Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report risk of inconsistency, lack of coordination, and delays caused by internal debate. As long as the new procurement policies, regulations, and procedures provided by the Regulations for the new PPP Act are not in conflict with, i.e. are supplementary to rather than modifications to, the existing procurement policies, regulations, and procedures then the language in the new PPP Regulations can be seamlessly integrated into each agency’s existing procurement regulations. This has been done successfully in a number of countries. Basically, the approach is to provide comprehensive procurement regulations that clarify to line agencies, the public, and the private sector: : “if you are using PPP, the following procedures must be followed. All other traditional forms of tendering using public funds, will use existing procurement regulations”. PPP Unit and Institutional Framework: Key Considerations A typical PPP Unit in a country of Malawi’s size should be lean and nimble, but also have the capacity to cover a range of functions and grow in scale as the program progresses. The PPP Unit should have core technical and management staff and utilize, to the greatest extent possible, local and international experts to keep costs down and increase the skills mix available to the GOM. Most PPP Units have two or three core functions and/or divisions. In Malawi, the PPP Unit might have three Divisions: (1) a PPP Transaction Division (with staff addressing Privatization as and when requested) ; and (2) a Legal, Contract Monitoring and Compliance Division, which will supervise both PPP and Privatization contracts and a 3) Education and Promotion Division proactively and reactively work with line agencies in understanding and using the PPP guidelines, procedures, and best practices to ensure that PPP projects follow the rules and achieve the desired results. There should also be a Project Development Facility (PDF) which would have a separate legal status (trust account), but would have its own budget from Government and/or donor grant resources, from which the PPP Unit would access funds to engage consultants to prepare feasibility studies for PPP projects. The PDF would operate as a cost-reimbursable fund that would hire foreign and local experts to advise various line agencies on the PPP transaction process. In order to utilize the funds and the expertise, line agencies would have to follow the PPP guidelines laid out by the Regulations and procedures of the PDF. Moreover, bidders on PPP projects would have to agree, in advance of submitting bids, to reimburse the PDF for a agreed upon amount to cover the costs of bidding, which ultimately reduces transaction costs for both the GOM and the private sector. The PDF’s ultimate goal is to promote a transparent and efficient process to conduct PPP transactions and to develop the highest quality of bankable and affordable projects possible. I.A. PPP Unit Human and Financial Resources Regarding staffing of the PPP Unit, the expertise required to cover all phases of the Project Life Cycle (which includes project identification, appraisal, development, structuring, tendering, negotiation, contracting, and monitoring) should include those listed below o Economic and Financial analysis THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 6
Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report o o o o o o Financial risk analysis & risk assessment; Asset management & engineering assessment; Transaction negotiations, both legal and financial; Legal agreements/contract preparation and management; Project appraisal (affordability, risk allocation, and value for money) Public awareness, outreach and education. In infrastructure, the long-term project risk of up to 20 to 30 years can be enormous if the PPP Unit does not have the above-described expertise and access to experienced PPP specialists. As is the case in most countries, much of this experience should be acquired from the local and international private sector. While GOM capacity is high and the experience in some agencies is substantial, the requisite depth and breadth of PPP experience will likely have to be outsourced. Of course, in the long run, this also saves operating costs, as the PPP Unit will be able to add more resources as required. Therefore, competitive recruitment will be required as well as the need to solicit funding, both from GOM and donor sources to finance operating expenses and consultant services. Best practices in other countries, as well as considerations in Malawi, influence what the PPP Unit should resemble. In general, we suggest commencing with a small initial team of approximately 4-5 personnel until such time that a) the ‘deal flow’ is identified and matures, b) Long term PPP legislation is established and c) Outsourcing of experts to develop and oversee PPP transactions is mainstreamed. Within this report we anticipate that the mature PPP Unit at its final stage (3-5years plus) will have a small but flexible team of 10 or more professionals, overseen by a Managing Director with Division or Practice heads. These managers will need to be able to oversee and manage external consultant inputs, as well as liaise with donors to maximize the effectiveness and utilization of grant funding. The PPP Unit will need to be scalable and demand driven, and its management will need to be proactive in initiating things like stakeholder awareness, training and capacity building, dissemination of information relating to PPP, standardization of PPP procedures, and the local and international marketing of PPP project opportunities. The need to scale up to these ‘mature’ levels will be determined by impact and demand for services, including high growth areas such as municipal PPP’s rural PPP’s, and social PPP’s such as health and education, in addition to traditional economic infrastructure. PPP Unit Interim and Long Term Roles and Institutional Relationships After considering several options and after examining a number of existing Government bodies, such as, MOF/PERMU, OPC, DSC, the PC, MoTPSD and its MIPA, MoTPW, and the status of MoEPD, we have narrowed down our analysis to one preferred option (see Figure 1 below) In attempting to utilize existing expertise, PERMU and the PC offered the most promise, however not without some institutional alignment issues, as well as limitations of staff resources in PERMU and the present physical location of the PC. We also took into consideration the Privatization Unit’s workload and how the PC would be (or would not be) able to fully or partially integrate PPP activities within its current mandate or an expanded mandate. THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 7
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Development of Policy, Legal, and Insitutional Framework for - ppiaf

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