HOW TO ACCESS UK EXPERTISE IN PUBLIC PRIVATE PARTNERSHIPS A BRIEF GUIDE FROM UK TRADE & INVESTMENT

Transcription

1 HOW TO ACCESS UK EXPERTISE IN PUBLIC PRIVATE PARTNERSHIPS A BRIEF GUIDE FROM UK TRADE & INVESTMENT

2 INTRODUCTION The UK Government is firmly committed to modernising the delivery of its public services. The public expects to receive the best value for money coupled with the highest quality of services. Public Private Partnership (PPP) is a process which has been extensively adopted by the UK Government to satisfy this need. Through the development of purpose designed and well maintained facilities it has proved consistent in delivering value for money. Between 10 and 15 per cent of public expenditure in the UK is now delivered under PPP based contracts. These contracts are based on long-term partnerships between the public and the private sector. This innovative approach has ramifications on the way public sector services are delivered, with the emphasis being placed on the service outputs required, rather than on treating the infrastructure as an end in itself. The PPP concept has attracted worldwide interest. Other governments are showing themselves keen to know how the UK approach can be adapted to meet the specific requirements of their own public services. Achieving an effective partnership with the private sector and creating the framework against which long-term private sector investment in public services can take place is no easy task. In addition a sympathetic legal framework needs to be in place for successful implementation of the PPP approach. This is where the UK can help. There is unrivalled PPP expertise in both public and private sectors, and a range of sources from which further research is available. The PPP team in UK Trade & Investment, together with our private sector partners, International Financial Services London and the British Consultants and Construction Bureau, will be pleased to provide you with more information. UK Trade & Investment is the Government organisation that supports UK companies trading internationally and overseas enterprises seeking to locate in the UK.

3 ACCESSING UK EXPERTISE IN PUBLIC PRIVATE PARTNERSHIPS Strong and dependable public services lay the foundations for a flexible and productive economy. They also promote opportunity and security for all. But efficient and responsive public services require sustained flows of investment, matched by efficient service delivery. In the United Kingdom Public Private Partnerships (PPP) are helping to furnish both. The principles of value for money and good governance embedded in the PPP approach can be extended to countries at various stages of development. PPP are a cornerstone of the modernisation of public service delivery in the UK, underpinning the British Government s economic growth strategy. THE PPP EXPORT ADVISORY GROUP HAS BEEN ESTABLISHED TO HELP INTERESTED PARTIES TO GAIN ACCESS TO THE UK S UNPARALLELED EXPERTISE IN PPP. This brochure comprises a suite of information from UK Trade & Investment, IFSL and BCCB the principal members of the PPP Export Advisory Group covering various aspects of PPP and should be read as a comprehensive guide to the UK experience. It explains how this quiet revolution is being achieved. It also provides contact details for the main UK centres of PPP expertise. Representatives of government in other countries that are keen to learn more about the UK experience and wish to draw on UK expertise are encouraged to get in touch with their British counterparts through the PPP Export Advisory Group. (contact: kamala.sekar@uktradeinvest.gov.uk)

4 WHY HAS THE UK BEEN SO SUCCESSFUL? The UK took a hard look at its problems with public procurement and public service delivery during the 1980s and was not at all satisfied. Cost and time overruns were common in major projects with conflict between contractors and the public sector sponsor a major cause of poor performance. Buildings in the education, health and other public service sectors were also generally poorly maintained, which inevitably impacted on the quality of services provided. Yet elsewhere in the UK, such as in the offshore oil and gas sector, examples of what could be done by removing the conflict between project sponsor and contractor were providing some startling results in the cost, delivery and ongoing maintenance throughout the life of the project. In other words doing things differently at the start could favourably affect the whole life costs of the project. In both the public and private sector attitudes had been influenced by a decade of expertise developed in the UK s programme of privatisation of large-scale infrastructure such as power, water and transportation. A programme which has demonstrated that bringing together private sector skills with better informed public sector procurement delivers better services for the public. PPP in the UK involves the public sector working in co-operation and partnership with the private sector to provide infrastructure and services. A key principle is to apportion the risks in the project such that each sector takes responsibility for those risks it is best able to manage. The principal driver for UK Government is to achieve best value for money for the taxpayer. The best value for money normally comes when the private sector manages the risks of financing, design, build and delivery of the service facility. There is no payment until the facility is delivered and fully operational. Maintaining the facility at constant or improved standards over the life of the project (normally around 25 years) is also the contractor s responsibility. There are agreed service levels and financial penalties if the contractor fails to deliver these standards. Contracts of this nature are more complex than the traditional Government procurement process. But their ability to remove the sponsor versus contractor confrontation, and drive through the best value for money in the design, build, operation and maintenance phases, enables PPP to deliver cost savings to the public purse over the whole life of the project. Two important factors became clear at an early stage of this new process. The first was that putting private sector capital at risk, not just its profit, creates a powerful incentive for the private sector to build the assets on time, maintain and deliver high standards throughout the contract life. The second was that if the private sector money was to be attracted and take on the attendant risks, the Government needed to show a strong commitment to the process of PPP, give clear indications on project priorities and demonstrate a deal flow of projects. To assist confidence levels in both the private and public sectors the UK Government recognised the need for a systematic and top down driven approach to generate a momentum in PPP projects. One of the contributory factors to the UK success was setting up of a high level task force in 1997, comprising experts from both public and private sectors, to look at critical issues, and focus on driving through projects. It was also to act as an important repository of knowledge for the public sector. The Task Force had a deliberately short life span and was reorganised in The Treasury now have responsibility for policy issues arising from procurement. The part of the Task Force responsible for deal flow and best practice was capitalised as Partnerships UK (PUK). PUK is now a PPP itself with 51 per cent of shares owned by the private sector. Another key to success has been the full involvement of Local Authorities through the agency known as the Public Private Partnerships Programme (or 4Ps for short). The agency provides practical support and guidance to all local authorities in England and Wales to enable them to improve their

5 procurement capability, particularly for large projects, through partnership structures. Having worked with 200 local authorities to date, 4Ps is recognised as an unrivalled source of best practice and practical guidance on project procurement. By January 2006 the UK Government had demonstrated its commitment to PPP as a key part of its strategy to modernise and improve public services by signing off over 700 projects. These cover a broad range of sectors, with a total capital value of 44 billion. PPP activity in the UK spans the full range of government activity from central through regional and down to municipal level. Examples are: In the transport sector a variety of projects including: roads, bridges and light rail have been undertaken. In education nearly 250 new schools have been built or refurbished and many new halls of residence have been built for universities. 46 new hospitals and 119 other health schemes are in operation. The 13 PPP prisons now look after over 10 per cent of the UK s prison population. There are PPP courts of justice and police stations. The Ministry of Defence has undertaken projects from garrison buildings and accommodation through training colleges and simulators to tank transporters and heavy sea-lift vessels. Other projects carried out include: water, waste management, canals, street lighting, fire stations, government buildings, leisure centres, and social housing. PPP is continually evolving as the Government seeks to deliver further value for money benefits in its public investment programmes. This can be seen in the creation of the highly successful Local Improvement Finance Trust (LIFT) programme in the National Health Service (NHS) and the Building Schools for the Future (BSF) programme, which are massive capital investment programmes for hospitals and schools respectively, delivered through innovative publicprivate structures. MEASURING THE SUCCESS OF PPP Use of PPP in the UK is subject to a rigorous value-for-money appraisal process involving a qualitative assessment of the viability, desirability and achievability of PPP, supported by financial modelling. This modelling includes the expected cost of the same procurement carried out by conventional means. And conventional procurement is used where this has advantages over PPP. A British Government commissioned report recently found that PPPs are delivering better value for money and are on average delivering savings of over 17 per cent compared to traditional forms of procurement. Time overruns have also been correspondingly reduced over conventional procurement. Our evidence shows that projects have been completed on time in almost 90 per cent of cases, and in every case the public sector has paid what it expected to pay. These results have been confirmed by the independent findings of the National Audit Office (NAO). In a small number of cases when projects have not been completed on time (usually due to changes in requirements by the public sector), it is the private sector that bears the cost, not Government. We believe that there are important lessons to learn from the UK experience of the early 1990s. We did not get everything right. Where problems existed we adapted the policy to provide practical solutions. With the right focus on priorities, with the introduction of sufficient competition, with the involvement of the workforce in the process of change and the drawing up of service requirements, major cost savings and improved service delivery can be achieved over the life of the project.

6 WHY SHOULD YOU LOOK TO THE UK GOVERNMENT TO LEARN ABOUT PPP? The UK Government is willing to share its experience with other governments looking seriously at improving value for money in public service delivery. The learning curve can be steep and time consuming, and some mistakes are inevitable. Governments new to the PPP approach can learn quickly from the UK s experience, including our mistakes, and achieve reductions in terms of years in the process of mobilising an effective delivery of PPP based projects. The UK is well aware that its own model will not necessarily transfer directly into other economies. But it can advise how the UK s unrivalled experience can be used to adapt the principles of the PPP approach to take into account the different legal, fiscal and risk factors that exist in other countries. In the UK, for example, it was essential to make changes in primary legislation in order to enable PPP to operate effectively. Although the process and emphasis may be different, similar changes in the laws of other countries may also be needed and the UK legal sector has experience in advising on potential pitfalls and solutions not just in the UK but also internationally. The UK base of expertise does not lie just in the public sector. Innovative developments in PPP solutions are very much driven by private sector advisors, financiers, contractors and operators. These firms represented by IFSL and BCCB whose publications on PPP are attached, have a wealth of international experience in providing the highest quality professional advice on PPP and related approaches such as concessions, privatisations and outsourcing. This experience is not just related to project specific advice such as project and service planning, documentation, design, construction and engineering, finance and procurement. It also covers advice to government on policy development, the building of institutional infrastructure, legal structures and education for government officials. All other countries that have developed a PPP programme, such as Ireland, Portugal, Netherlands, South Africa, Australia and Japan, have used UK expertise to get their projects moving. Many are now developing their own expertise: an exportable skills base that will enable them to service the growing international market. Over sixty other countries are now looking to the UK for help on establishing PPP programmes with new markets, such as Norway, Germany and Mexico starting to deliver projects as well.

7 The PPP Export Advisory Group co-ordinates international enquiries about PPP. The UK Government is represented by UK Trade & Investment, IFSL represents the financial sector, and BCCB represents many of the services and suppliers directly involved. For further information you should contact: UK TRADE & INVESTMENT UK Trade & Investment is the Government organisation that supports UK companies trading internationally, and overseas enterprises seeking to locate in the UK. It has international trade teams active in the UK s Embassies, British High Commissions and Consulates world-wide. In the PPP sector it works in partnership with other Government departments and experts in business to deliver advice and help meet the strong demand for information on the UK s PPP experience from overseas government. More information from: UK Trade & Investment International Services Group 2 Kingsgate House Victoria Street London SW1E 6SW Contacts: Graham Rowcroft T: +44 (0) E: graham.rowcroft@uktradeinvest. gov.uk W: Kamala Sekar T: +44 (0) E: kamala.sekar@uktradeinvest. gov.uk W: Jamie Cribb T: +44 (0) E: jamie.cribb@uktradeinvest. gov.uk W: INTERNATIONAL FINANCIAL SERVICES LONDON (IFSL) International Financial Services London is a private sector organisation with 35 years experience of successfully promoting the UK based financial services industry throughout the world. Membership is drawn from across the spectrum of the UK s financial and professional services firms and organisations. IFSL works in partnership with UK Trade & Investment and other Government departments and with the British Consultants and Construction Bureau (BCCB) in the provision of events and advice tailored to meet the needs of overseas governments and companies seeking private and public sector expertise in PPP. IFSL is UK Trade & Investment s partner in the promotion of the UK s financial services sector. Contact: Stephen Harris T: +44 (0) E: s.harris@ifsl.org.uk W: BRITISH CONSULTANTS AND CONSTRUCTION BUREAU (BCCB) BCCB members are UK advisors and consultants capable of providing the most complete and sophisticated services in the world. The advisory expertise within BCCB played a critical part in the commercialisation and privatisation of much of the UK s power, water and transport infrastructure. The membership of BCCB has extensive experience with all facets of contracting, facilities management and provision of hardware and other services relating to operation of long-term PPP projects. Members are active internationally helping overseas governments in the realisation and delivery of PPP solutions. BCCB works with UK Trade & Investment and IFSL in meeting the worldwide demand for information on the UK experience with PPP. Contact: Nigel Peters T: +44 (0) E: np@bccb.org.uk W:

8 Other important stakeholders that can be engaged through the PPP Export Advisory Group include: HM TREASURY As the driving force behind the modernisation of public service delivery in the UK the Treasury has some excellent publications and references available on its website. The publication PFI: Meeting the Investment Challenge published in July 2003 is a recommended reading. This document and many others important to governments seeking to review their public service delivery can be accessed on the Treasury s website: PARTNERSHIPS UK (PUK) Partnerships UK is a private sector company with the Government holding a minority stake. It has been promoted by the UK Government to take forward and expand the work of the former Treasury Task Force in developing PPP. It works only with the public sector and its role is to provide Government and the public sector with the private sector expertise and resources necessary to build better partnerships to achieve: Fast and efficient development and procurement of PPP Strong PPP that build stable relationships with the private sector Savings in development costs Best value for money Governments seeking to establish a task force should consult the PUK website for advice and reference sources on: PUBLIC PRIVATE PARTNERSHIPS PROGRAMME (4PS) 4Ps is the local government project procurement agency. It provides practical support and guidance to all local authorities in England and Wales to enable them to improve their procurement capability, particularly for large projects and through partnership structures. Guidance and case studies can be downloaded from the 4Ps website: THE NATIONAL AUDIT OFFICE (NAO) The National Audit Office scrutinises public spending on behalf of Parliament. It is totally independent of Government. NAO audits the accounts of all UK Government departments and agencies as well as a wide range of other public bodies, and reports to Parliament on the economy, efficiency and effectiveness with which Government bodies have used public money. This work saves the British taxpayer millions of pounds every year. NAO's responsibilities include reporting on the value for money of PPP deals and on cross-cutting issues, as well as contributing to analysis and guidance and assisting public sector bodies. More details of auditing PPP against other forms of procurement can be found on the website:

9 THE DEPARTMENT FOR CONSTITUTIONAL AFFAIRS (DCA) The Department for Constitutional Affairs has responsibility in Government for upholding justice, rights and democracy. In order to serve the public more effectively DCA is driving though improvements to the justice system, and modernising and safeguarding the constitution. The work in the UK pioneering the concepts of PPP and the Private Finance Initiative (PFI) has been supported by the UK s legal system, which is very suitable for developing and negotiating infrastructure related contract development. More details on Website: THE LAW SOCIETY The Law Society is the professional body for Solicitors in England and Wales. It serves society by working to improve access under the law, and sets standards that underpin the profession s reputation as the best independent professional advisors. British law firms with experience of PPP and PFI can deliver that expertise into other countries seeking to use private sector developers to improve their infrastructure, and mitigate the competing demands faced in competing for capital investment in the public sector. UK legal firms are innovative and well able to deal with the dynamics necessary in the construction sector. British law firms regularly advise overseas governments on the key aspects of legislation required to enable the Build Operate Transfer and PPP process to operate effectively and provide best value for money. More information on Website:

10 LEARNING MORE 1. Research the websites in previous pages for guidance. 2. Arrange a call on UK Trade & Investment at the Commercial Section of the British Embassy, High Commission or Consulate to discuss your interests in the UK s PPP approach. 3. If visiting the UK arrange to call on UK Trade & Investment s London Office for preliminary advice on the PPP sector in the UK. 4. Arrange calls at the offices of IFSL and BCCB who will be able to further advise on specific areas of PPP expertise in the private sector. WHAT FORM OF ASSISTANCE MIGHT BE POSSIBLE? Programmes for government officials will vary according to the nature of the economy and the stage of acceptance of PPP in the country concerned. There may be constraints on the resources available at any one time from UK Government departments. The UK Government and its partners in the private sector are committed to helping bring the benefits of value for money to other countries seeking to achieve better value for money in public procurement. We therefore will look at what may be the most appropriate response to meet the needs, experience and sector interests of the officials concerned. Possible mechanisms to assist the spread of understanding and enhance expertise may include: Inward missions and visits of individuals to the UK to meet key experts in the public and private sectors An outward mission or specially designed workshop or seminar to help educate officials and spread information to a wider audience in your own country Direct advisory services to governments from the private sector Short-term business attachments of UK experts to overseas government departments, ideally within the Ministry of Finance or equivalent The secondment of overseas government officials to key departments and other organisations involved in delivering PPP in the UK. UK Trade & Investment, IFSL, BCCB and other UK experts welcome the chance to discuss and advise you on the options that may be suitable for taking forward PPP for the development of infrastructure in your country. For more information contact the PPP Export Advisory Group: graham.rowcroft@uktradeinvest. gov.uk s.harris@ifsl.org.uk np@bccb.org.uk

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12 The pulp used in this document is totally chlorine free and fully recyclable and biodegradable Published February 2006 by UK Trade & Investment Crown Copyright URN 06/731