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

Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi
Final Report
Monitoring contractors' performance through Key Performance Indicators
VI.L. Phase II Unit Builds Deal Flow for Transition to Phase III Unit
Building a “pipeline of deal flow” is investment-banking terminology that is equally applicable
to PPP Units. At the macro level, it makes no sense to invest a lot of Government and donor
money into a new PPP framework and Unit if there is not going to be a good stream of PPP
transactions to provide Value for Money for the funds they have invested. At the micro level, a
highly-skilled PPP Unit team will have nothing to do if there aren’t any transactions.
So let’s think for a moment about where PPP transactions come from. Generally, PPP deals are
more demand driven than procurement transactions, which tend to be design driven. So the
process of conceptualizing, identifying, and prioritizing potential PPP transactions comes from
government bodies (and private entities, in the case of unsolicited proposals – which are dealt
with in detail by the draft PPP Act and PPP Regulations included in the Annex to this report)
that are tasked with service delivery. Examples are a Ministry of Transport developing a plan
to expand capacity in ports and airports, a water utility looking to expand its distribution
network or build a new treatment plant, a Ministry of Public Works looking to build some new
highways using a toll road approach, and a Ministry of Health looking for ways to reduce the
overhead in its public hospitals by contracting non-medical services to the private sector.
Note that none of the above examples includes the PPP Unit. So PPP deal flow is not only
“demand driven,” it is “ground up” driven. The paradox is that the best PPP skills are in the
PPP Unit, and yet most of the PPP deal flow is created by people who have the least training or
experience in doing PPP transactions.
In the various governmental bodies that are the source of PPP deal flow, the people involved
are mostly civil servants, many of which have little or no experience in business and are thereby
not familiar with the commercial dynamics that characterize PPP transactions. Their skills are
usually in engineering and/or procurement, and those are indeed the right skills to manage the
traditional relationship between government and the private sector, i.e. buyer and seller, known
generally as procurement. So how do we enable these people to create PPP deal flow?
The only answer is public awareness and capacity building. These people must be sensitized to
the PPP program so that they will make the effort to identify PPP opportunities. Then they will
nee conceptual training to enable them to develop PPP concepts in response to increased need
for service delivery, and then to develop those concepts into initial PPP project designs. From
that point, they will need capacity building to help them to prioritize their lists of potential PPP
projects, for presentation within their government bodies, and then develop the highest ranking
potential projects into business cases for submission to the PPP Unit.
THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 80