Triple Ps: Catalyst for development (II)

By Charles Nyika | Dec. 13, 2024

Public-private partnerships are used for large-scale infrastructure projects such as the construction of major highways.

GIVEN the challenges associated with today’s realities, the pressure to save public sector funds is unlike any in recent history.

For the public purse to survive and thrive in this highly volatile landscape, it may be necessary for governments to turn over all the rocks to achieve public sector welfare outcomes.

The changing economic and political environment has ushered in a number of complexities that require extraordinary solutions. For government officials, the economic ground remains subject to rapid shifts requiring immediate solutions.

We are in an era pregnant with societal challenges. There is no shortage of drama when it comes to the provision of public sector infrastructure.

The ever-increasing cost of implementing public sector projects is putting a serious squeeze on the fiscus. It is a mind stretching responsibility that keeps government officials awake at night. Access to working capital financing is not readily accessible and where available, it will cost an arm and a leg.

The continued rise in prices and volatility of same will continue to remain facts of life. The new normal will become the only normal. It is increasingly becoming clear that success in today’s business world will be measured in inches not miles.

The business world changes every day, and the subtle shifts often go unnoticed. It would appear every line of business, including the public sector, is being forced to do more with very little financial resources at their disposal, forcing them to lure private sector players in their cycle of public sector projects.

In government, there is tremendous pressure to do more with less. Said differently, governments are expected to do more without more.

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The full import of the message is not lost to government.

With many fiscal cliffs looming on the horizon, public sector organisations are probably forced to look elsewhere for funding.

Introducing private sector technical partners in the public sector will not only increase the potential size of government capital projects, but this model will tap into the institutional and private equity funds looking to deploy capital in infrastructure projects.

The private sector usually invests in projects where they see the potential for a financially viable long-term and sustainable return on investment.

Wherever and whenever private sector partners appear to see potential high returns, they will be keen to leverage the use of increased foreign capital — in both equity and debt — which could easily find its way into future government projects.

This will help in the expansion of capital sources available for the funding of infrastructure projects.

The public-private partnerships (Triple Ps) are generally regarded as vehicles for attracting private investment which will essentially limit fiscal exposure.

In the realm of infrastructure development and service delivery, private sector technical partners have got the capacity to be actively involved in the upfront capital infusion of project finances with ease as long as they see a potential return.

The private sector technical partners could be used as a conduit to bring in capital resources, including funding from banks, international investors and or international consortiums endowed with very rich international experience in the funding and implementation of high value and high-risk infrastructure projects.

In the quest to keep debt off public sector balance sheets, the government may see the financial wisdom of inviting private sector organisations into collaborative partnerships.

The private sector’s financial expertise and access to diverse funding sources can optimise project financing at potentially very low interests’ rates.

By attracting private sector participation, governments can leverage additional financial resources beyond their budgetary limitations. This injection of private funds into infrastructure development can unlock new opportunities for economic growth, job creation and business expansion.

Governments will, therefore, always find the lure of Triple Ps difficult to resist, positioning Triple Ps as core public sector value offerings.

Triple P projects could easily facilitate the project management of signature projects in the long and tiresome journey to national infrastructure development.

The private sector can improve the operational efficiency of public services through innovative project management process flows that are foreign in the public sector. Such partnerships are generally highly-encouraged because they are helpful for large ventures that require the engagement of highly skilled workers coupled with a significant cash outlay to implement innovative project outcomes.

The public sector gains access to the latest innovations, cutting-edge technologies and industry best practices by partnering with private entities.

The infusion of private sector innovation can lead to the development of advanced infrastructure systems, streamlined project management processes and novel solutions to complex challenges.

Private sector technology and innovation improve the operational efficiency of project activities with the resultant increase in return on investment.

Triple Ps are being the preferred models of capital-intensive projects mainly because the public sectors can easily shift the burden of financial risks from taxpayers to investors.

The private sector will be required to bear the brunt of the construction risks and potential cost overruns associated with high value projects.

Alternatively, the Triple P model seeks to achieve optimal risk sharing arrangements for the benefit of the public at large.

The other benefit associated with the public-private partnerships emanate from the fact that projects of this nature are normally undertaken after a full-scale feasibility study which provides a full risk appraisal.

There is nothing riskier and potentially expensive than trying to work within unrealistic expectations that could have been subjected to research prior to project implementation.

It is common knowledge that the private sector risk management capabilities will subject project activities to a due diligence exercise that looks at the entire spectrum of risks, often with a particular emphasis on potential commercial and financial effects.

The private sector will be required to provide the much-needed robust risk management processes from the beginning of the project and apply a continuous risk management approach throughout the project’s life cycle.

Significant project related risks are usually transferred from the public body to the private party on the risk sharing principle on the understanding that particular risks should be borne by the party that is best suited to manage the risk.

Common risks associated with projects of this magnitude include design related costs, construction risks, project overrun risks, demand related risks coupled with operation and maintenance risks, among others.

The use of private sector debt and equity models could provide the public sector with a buffer against certain risks, such as contractor insolvency or contractor non-performance.

It is common knowledge that the additional rigour, which the private sector investors and lenders apply to risk assessment.

Monitoring is perhaps the single biggest variable that probably explains the superior cost and time performance of Triple Ps over the known traditional contract models.

Prior to project implementation, contracts between the private sector and governments will clearly spell out acceptable performance standards, risk-allocation mechanisms, projects responsibilities and accountability together with the rewards and penalties during and after project implementation and commissioning.

The Triple Ps model is often regarded as the perfect model to lighten the public sector’s burden since the private sector bears all construction risks.

This will obviously mitigate the overruns and schedule delays that plague large scale infrastructure projects.

The risks are further mitigated through the adoption of watertight long-term contracts that emphasises the requirement to link payment to performance.

Against a backdrop of significant uncertainty, the private sector partners in a Triple P will be contracted based on outcome-based contracts that only release money upon satisfactory completion of certain agreed deliverables which places project delivery excellence at the fore.

Such contracts have enhanced the potential rewards associated with equitable and efficient access to quality public health services.

Stakeholders such as taxpayers need to be convinced that such partnership arrangements work both in words and actions.

Performance levels must be seen to improve, and the results should speak for themselves.

Partnership models must be pursued in a manner that goes beyond the minimum effort.

This will provide the necessary safety belt to ensure that public services are achieved and for a meaningful return on investment.

The promise of value realisation and multi-fold return on investment is too hard to ignore.

Triple Ps provide an accountability mechanism designed with a view to track red flags and follow the public purse, leveraging on-the-spot expertise of highly trained and experienced civil servants of high repute.

This will assist in taking time and cost out of the implementation process flow when conducting project management.

However, it must be noted that taxpayers oftentimes tend to err on the side of caution when it comes to the use of Triple Ps.

It would appear there are some peculiar cons associated with Triple Ps, although some of those are more perceived than real.

A growing body of evidence is of the opinion that the views of whether public-private partnerships are the best way forward often boil down to individual opinions.

There are growing and somewhat opinion splitting views on the efficacy of Triple Ps in achieving public sector deliverables.

Opinions will remain divided on the perceived importance of public private sector partnership models.

The rank and file in local communities continue to spot gaps between message and action when such projects are not run to perfection. There is a growing army of critics with opinions being as varied as the industry itself.

In this dynamic business milieu, Triple Ps often fail to go the full distance due to unnecessary government bureaucracy and unnecessary bickering synonymous with civil servants.

The government’s credibility is increasingly becoming threadbare when it comes to service delivery.

But in the same sentence it has also been acknowledged that the benefits associated with the full implementation of Triple Ps are plenty and will remain plenty.

Decisions on the use of Triple Ps will always be clothed with good intentions.

It is often a sworn perspective that Triple P projects will serve as visible reminders and a source of pride to local communities who participate in the development of their locales.

The cumulative effect is a groundswell of good feelings in the local community.

There is immense latent value hidden in such partnerships provided they are implemented according to the rule book.

Anecdotal evidence seems to confirm this highly spoken about hypothesis.

Triple Ps can step in to make things better, make life better with a view to meet the promise of the moment.

It is often said: that promote Triple P models and the world is in your pocket.