Delivery of infrastructure development through public private partnerships : managing PPP procurement more efficiently

Malao, Mathapelo (2011-12)

Thesis (MBA)--Stellenbosch University, 2011.


Public private partnerships (PPP) are a critical driving force in the landscape of infrastructure projects in the world. South Africa’s adaptation of the PPP guidelines is therefore encouraging as it provides a framework for government and business to partner together in the delivery of basic infrastructure services to the public. Many challenges have been experienced in the South African PPP fraternity that have contributed to the stagnation of value-adding projects being implemented. In spite of these challenges, some developed countries have successfully implemented PPP projects which have concomitantly presented opportunities and lessons that South Africa can draw from. This research study investigates the fundamental causes of the challenges present in the South African PPP market and seeks to employ practical solutions in addressing these. The challenges have been widespread and include: the management of risk and how to account for risk; negotiations and the manner in which the procurement phase is operated in PPP projects; drafting of sound policies; the various complexities that exist within concession agreements; internal capacity constraints within the PPP Unit; lack of capacity and skills within government entities and political interference. Several vulnerabilities also exist in the bidding process of many countries and if these are not properly addressed by the advisors and institutions concerned, these could potentially delay the entire procurement phase. PPPs should be seen as a catalyst for providing basic infrastructure services that have the intent of improving the quality of lives for ordinary citizens. This, however, will only be successfully addressed once key success factors and lessons are drawn from other international markets that have demonstrated experience and skill in the implementation of PPPs. Three case studies, namely, the Gautrain Rapid Railway Link; the PPP between the Eastern Cape Department of Health and Life Healthcare Group in the Humansdorp district and the Inkosi Albert Luthuli Hospital, have been investigated to extrapolate key findings and research findings from the procurement aspects of these projects. With the increase of PPP projects in South Africa, more research also needs to be conducted in putting together a standardisation pack for some of the replicated projects. These would include accommodation and road projects, as many of these have been done previously. Lessons from these projects should be drawn to formulate sound guidelines for stakeholders. Government also has an equal responsibility to play in ensuring that it promotes private sector involvement during the procurement phase by creating an enabling environment which is fair to bidders and which allows for prompt decision making. Principle agent problem continues to be a threat to the perception of PPPs as the private sector’s objective is often different from that of government. It is therefore important that a healthy balance between government’s socio-economic objectives and the profit-maximising objective of the private sector is met. For the public sector thiS means not neglecting society’s needs, but at the same time not under-budgeting the unitary payment of the private sector. If South Africa ought to remain globally competitive and ahead of its emerging market counterparts, there needs to be a complete change of priorities regarding the type of PPPs implemented and government also needs to remain committed and co-operative in the decision-making process.

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