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 will allow for the recruitment of professional personnel with the depth of industry experience required to achieve rapid results. Accordingly, the PPP Unit could be established as a semiautonomous body, perhaps along the lines of the Executive Agency model incorporated into the draft PPP Act provided in the Annex to this report. Having said this, however, there are very successful PPP Units operating within the national Treasuries of several countries. Employees of these Units are civil service employees, and are both highly skilled and effective in their job performance. Civil service compensation levels in some of those countries, e.g. U.K. and Australia, are significantly higher than in Malawi, but the existence of successful PPP Units staffed by civil servants raises the following issue: Will the primary function of the Unit be: ‣ Manage the process; or ‣ Manage the transaction? This is a core issue in the design of the PPP Unit in Malawi, or in any country. If the primary function of the Unit is to “manage the process,” which means ensure that all PPP projects are tested for Affordability, Risk Allocation, and Value for Money, and that those approvals have been obtained before issuing the Request for Qualifications, Request for Proposals, and Contract Negotiations materials, respectively, or … Is the primary function of the Unit to actually perform the technical tasks required to apply the three tests associated with PPP project appraisal, assist the project sponsors in preparing all the procurement and contract documents, assist in contract negotiations, and generally provide a high level of technical support to the whole process, especially when there is capacity limitation on the part of the sponsoring agency? If we go to the extreme of Option 1, then we will probably end up creating nothing more than another level of bureaucracy. If we go to the extreme of Option 2, then we have created the equivalent of a boutique investment banking firm. The solution to this issue is to find the most appropriate middle ground given the particular environment of Malawi, and tailor the PPP Unit design to accommodate that environment. In doing so, we must recruit and train Unit personnel who will be able to provide technical inputs when there is lack of capacity on the part of project sponsors, but not so high a level of technical skill that we have to pay investment banking salaries in order to recruit them. Generally, the approach we recommend is more toward the “manage the process” option, but with the caveat that sufficient technical skill must be available in-house to help with managing the transaction when there is a capacity constraint on the part of the project sponsor. Remuneration This is possibly one of the more difficult areas for the GoM, which is seeking to reform its civil service pay structures and the growing differential in status between the many and various parastatals. IP3 has articulated the need for competitive pay structures comparable with the THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 66
Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi Final Report private sector to recruit and retain the level of personnel required for the PPP Unit. The Consultancy team has indicated that regardless of structure the right personnel within the PPP Unit will make all the difference. The merger of resources from the PC and other organizations is encouraged. The remuneration policy of the PPP Unit should follow Malawi best practice, proposed for a number of recent newly established parastatals. Below we discuss the remuneration options. The Consultancy team has identified the remuneration policies needed for the projects, and the competencies required to run, manage and deliver on PPP projects for Malawi. Possible compensation levels are in the budget for the PPP Unit included in this report. Budgets & Formals of Compensation Proposed The mode of remuneration adopted by the PPP Unit will largely depend on its legal status. If the PPP Unit is established as a Civil Service Department then the following conditions apply. Employment could be available on permanent and pensionable terms for all staff. It is possible under Civil Service status to employ some staff on special contracts as noncivil servants. If the PPP Unit gets established as a Project under a Civil Service Department then the following conditions would apply. It is possible to employ all staff on special non-civil service contracts. If the PPP Unit gets established as a statutory body, such a Unit or Commission or Executive Agency, then the following conditions would apply. Senior expert staff could be employed on fixed term contracts approved by the Board, while other general support staff can be employed on permanent and pensionable terms if seconded from the civil service. All staff could be on fixed term contracts while with the PPP Unit. Some staff could be on special technical advisory positions, not considered as part of the establishment. In establishing a PPP Unit, the Malawi Government will need to pay close attention to: The need for a high performance organization that is output or results oriented. For such an organization to be established, there will be a need for the institution to have a flexible competitive remuneration structure that allows for the recruitment and retention of high caliber staff. In this connection, employment for officers in senior management would have to be recruited on fixed term performance related contracts. The need for employment arrangements that allow for recruitment of a few specialists from around the world on special contracts with clear counterpart arrangements for capacity building and skills transfer, as people with skills required to effectively operationalize a PPP Unit in Malawi may not be easy to find. THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 67
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31 March 2007 Mr. Constantine Chiko
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