How to Establish a Public Private Partnership
When entering into a public-private partnership, several factors allow both companies to increase their chances of success at the beginning of the partnership. The most successful public-private partnerships have integrated key strategies and tools into the planning, construction, execution and maintenance phases in order to achieve the most desirable results. To be clear, there are government agencies that implement projects in a repeatable manner. They have recognized the need for specific risk management skills and have worked effectively with the private sector, or some have even built risk management capabilities themselves to do so. However, other government agencies have not yet done so too often, and there are many areas where they have not had repetitive experience in managing certain types of projects and have acquired or acquired the necessary risk management skills. These are the situations where misalignment occurs and are at the center of this article. 1. Partnership agreements may contain the conditions for the implementation and implementation of the objectives of Articles [insert sections here] of the Revised Code, including the duration of the contract, the tariffs or charges for the public services to be provided or the methods or procedures for setting such tariffs or charges, standards for the utilities to be provided, responsibilities and standards of operation and maintenance. a related project, the financial assurances required, financial and other data communication requirements, the basis and procedures for terminating the contract and recovering ownership or ownership of the project, as well as default events and remedies for late payment, including mandamus, an equity action, a lawsuit in court, or a combination of these remedies.
A municipal government, for example, may be heavily indebted and unable to carry out a capital-intensive construction project, but a private company may be interested in financing its construction in exchange for maintaining operating profits once the project is completed. In the private sector, on the other hand, construction and trade risks can have massive financial consequences. (Consider, for example, the holistic enterprise risk management framework that mcKinsey uses with its retail clients, as shown in Figure 1.) A 10% cost overrun can mean that a company is no longer making a profit on a particular initiative – and a project manager is looking for a new job. Many of these projects can result in the bankruptcy of the entire company. For this reason, successful private contractors have developed strong risk management capabilities throughout a project`s lifecycle, from development to construction to the end of the operational phase. And private investors and lenders have developed sophisticated control mechanisms – the “muscles” without which companies cannot survive. Consultants with experience in finance, engineering, business analysis, legal issues and more can offer their services to the public sector through PPPs and vice versa. At Robbins-Gioia, LLC (RG), we work with our customers to test and refine each solution to meet their exact requirements. We pride ourselves on tackling complex challenges with new ideas and helping to make unexpected opportunities a reality. To learn more about public-private partnerships, visit www.teamrg.com. Increased private sector participation in infrastructure projects – especially risky private funds – can lead to efficiency gains, but only if private developers have the opportunity to use their risk management capabilities through a meaningful transfer of risks and responsibilities. Traditional procurement approaches, which take little account of commercial and financial risks, do not generate the same profits.
At the optimal level of private sector participation and risk transfer, private sector participants not only bring specific risk management skills, but also benefit from the ability of the public sector to adopt a long-term perspective and interest in the project and absorb other risks without fear of insolvency. The fact that the commercial and financial risk management capabilities of the private sector lead to efficiency gains in PPP projects explains why ensuring a meaningful transfer of risks to private sector stakeholders is crucial to the success of any PPP project. Another recurring complaint was that the focus on achieving project milestones diverted critical attention from monitoring the state of labour relations between public and private entities. .