ABSTRACT
Most governments in the developing world are often confronted with the challenges of financing public projects and these challenges seem difficult to overcome. However, in recent years, governments have evolved a way out of this by going into partnership with private sector firms through public private sector arrangement. This paper examined the relevance of public private partnership in the provision and management of public infrastructures. It gives a comprehensive insight on the public private partnership concept and its administration. For the purpose of this study, the project goes through the examination of different factors that determine the success of public private partnership procured projects with focus on Lekki-Epe Expressway and Lekki Conservation Centre. Oral interviews and personal observations were employed to collect information for this study. The study recommends that adequate measures be taken by the government in selecting a credible private partner and also adequate enlightenment of the public on the concept and its administration.
Keywords: Partnership, Public Private Partnership
1.1 INTRODUCTION
The Webster Dictionary (2011) defines partnership as a legal relation existing between two or more persons contractually as joint principals in a business; or a relationship resembling a legal partnership and usually involving close cooperation between parties having specified and joint rights and responsibilities. Olusegun (2011) derived a consensus meaning of partnership as the coming together of two or more people in a contractual agreement with a common aim and objective to establish an organisation. It could the light
of the above definitions; public-private partnership could be defined as a partnership between the government (and/or its agencies) and private sector entities, whereby risks and responsibilities are shared for mutual benefits. It is also seen as co-operative ventures between a public entity and a private party, to realize the common projects in which they share risks, costs and profits.
Van Dijk (2010) identified three types of financial partnerships, namely: private sector financing of co-operative ventures between the private and public sector within the framework of public-private partnerships (PPPs); private sector financing of private (or privatized) entities – usually joint ventures; and private sector financing of parastatal. The public-private partnership of a public project entails the design, build, finance and operation of public infrastructure by the private sector which the government has the statutory responsibility to procure and provided for the use of the general public and which has been funded by the tax payers. In return, the private sector concerned is empowered
to generate revenue either from levying of tariffs on users or the receipt of periodic service payments from the government over the life of the PPP agreement.
In recent years, governments at all levels have struggled to limit costs without reducing services and it is a common knowledge that most public-owned infrastructures and or services meant for public uses are not being well managed thereby reducing maximum utility capacity of such facilities and services. In a bid to meet public expectations in infrastructural developments, governments (Federal, State and Local Governments) are increasingly interested in managing public infrastructures in a more business-like manner, including exploring the formation of partnerships between the government and the private sector. This partnership initiative has engendered the use of a wide variety of terms, many of which overlap but may have subtly different meanings. This study is intended to facilitate a better understanding of public-private partnership. This paper examined public private partnership (PPP) concept and how this arrangement can best serve the interest of the general public who will ultimately utilize the project after its delivery.
2.0 THE CONCEPT OF PUBLIC PRIVATE PARTNERSHIP (PPP)
Pressure to change the mode of public procurement arose initially from concerns about the level of public debt, which grew rapidly during the macroeconomic dislocation of the 1970s and 1980s. The idea that private provision of infrastructure represented a way of providing infrastructure at no cost to the public has now been generally abandoned; however, interest in alternatives to the standard model of public procurement persisted. In particular, it has been argued that models involving an enhanced role for the private sector, with a single private-sector organization taking responsibility for most aspects of service provisions could yield an improved allocation of risk, while maintaining public
accountability for essential aspects of service provision. Initially, most public–private partnerships were negotiated individually, as one-off deals, and much of this activity began in the 1990’s. For instance, Britain, in 1992, the Conservative government of John Major in the United Kingdom introduced the private finance initiative (PFI), the first systematic programme aimed at encouraging public–private partnerships. The 1992 programme focused on reducing the Public Sector Borrowing Requirement, The Labour Government of Tony Blair, who came into Office in 1997, persisted with the PFI but sought to shift the emphasis to the achievement of “value for money,” mainly through an appropriate allocation of risk (Wikipedia, 2011). Since the 1990s, there has been a rapid rise of PPPs across the world. Governments in developing as well as developed countries are using PPP arrangements for improved delivery of public infrastructure and services. Governments are building transport (roads, railways, toll bridges), education (schools and universities), healthcare (hospitals and clinics), waste management (collection, waste-to-energy plants), and water (collection, treatment, and distribution) infrastructure through PPP. PPP is becoming the preferred method for public procurement of infrastructure and infrastructure services projects throughout the world.
A review of the partnership literature reveals that there are considerable variations amongst the many definitions of what constitutes a PPP. The widespread use of the term public private-partnership hides important differences between the different forms of public private collaboration (Schaeffer & Loveridge, 2002). While a unifying theme of these definitions is that all arrangements involve at least one public partner and one private partner; oftentimes, that is where the similarities end. In support of this perception, the
following definitions of PPP will suffice:
- Van Ham and Koppenjan (2001) identify PPP as ‘cooperation of some sort of durability between public and private actors in which they jointly develop products and services, and share risks, costs, and resources which are connected with the desired products.
- According to McMillan (2003), PPP is an agreement between government and the private sector regarding the provision of public services or infrastructure.
- The government of India in ADB workshop report (2006) sees Public Private Partnership (PPP) project as one based on a contract or concessional agreement
between a Government or statutory entity on the one side, and a private sector company on the other side, for delivering an infrastructure and services on payment of user charges. - In Wikipedia (2011), it was stated that PPP is a contract between a public sector authority and a private party, in which the private party provides a public service or paper and assumes substantial financial, technical and operational risk in the paper.
What can be deduced from these definitions is that PPP concerns a partnership between the public sector and the private sector entity, whereby, risks and responsibilities are shared for mutual benefits; a collaborative arrangement between government and one or more private parties; or a co-operative ventures between a public entity and a private party, aiming to realize common purpose in which they share risks, costs, and profits.
Thus, it is a means of bringing together social priorities with the managerial skills of the private sector, thus relieving government of the burden of large capital expenditure, and transferring the risk of cost overruns to the private sector. In this kind of partnership, rather than completely transferring public assets to the private sector, as with privatization, government and businessmen work together to provide services to the public. The system has been criticized for blurring the lines between public and private provision, leading to a lack of accountability with regard to funding, risk exposure, and the performance of such projects.
2.3 DIFFERENT APPROACHES TO PPP
The next part of this paper will explore how the concepts of PPPs are viewed in each of these approaches (Teisman & Klijin, 2002).
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2.3.1 Public Private Partnership (PPP) – A Tool of Governance or Management
A popular way of defining PPP is as a tool of governance or management. The dominant theme is that PPP provides a novel approach to delivering goods and services to citizens, and the novelty being the mode of managing and governing (Hodge & Greve, 2005). The authors who utilise this approach to PPP tend to focus on the organisational aspects of the relationship. Most definitions that focus on governance and management tools emphasise that PPPs are either inter-organisational or financial arrangement between the public and
private actors.
There are some common agreements in most PPP literature which focus on interorganisational arrangements. First, PPP is cooperation between organisations. The second aspect is sharing risks. Risk sharing is viewed as an important incentive for both the public and private sectors, since it is assumed that risk sharing could benefit both actors. The third prospect is that these types of cooperation can result in some new and better products or services that no single organisation either the public or the private could produce better alone. Finally, it has been noted that in a PPP a partnership involves a longer-term commitment which can continue for a number of years, say, for 10 to 30 years.
Finally, the Dutch Public Management Scholars, Van Ham and Koppenjan (2001) definition of PPP emphasized organisational relationships. They identify PPP as ‘cooperation of some sort of durability between public and private actors in which they jointly develop products and services, and share risks, costs, and resources which are connected with these products’. This definition has several features. First, it underlines cooperation of some durability, where collaboration cannot only take place in short-term contracts. Second, it emphasizes risk-sharing as a vital component. Both parties are in a partnership together had to bear parts of the risks involved. Third, they jointly produce something (a product or a service) and, perhaps implicitly, both stand to gain from mutual effort. Similar features are evident in the definitions of PPPs that are provided by Klijn and Teisman (2002), where PPPs are described as ‘sustainable cooperation between public and private actors in which joints and/or services are developed and in which risks, costs and profits are shared and as ‘a risk-sharing relationship between the public private – including voluntary sector to bring about a desired public policy outcome.
2.3.2 Public Private Partnership (PPP) – Tool of Financial Arrangements
Some definitions of PPP stress the financial relationships. There are promises that PPP reduces pressure on government budgets because of using private finance for infrastructures and they also provide better value for money in the provision of public infrastructure. These usages of PPPs are prominent in the literatures on infrastructure building. These mostly include BOT (Build-Operate-Transfer), BOOT (Build-Own-OperateTransfer) and BOO (Build-Own-Operate). The most common of these arrangements is BOT. Campbell (2001) suggests a definition of PPP focusing on financial arrangements; that is, ‘a PPP project generally involves the design, construction, financing and maintenance and in some cases operation of public infrastructure or a public facility by the
private sector under a long term contract’. There are other modes of financial arrangements in PPPs, in which both public and private actors are involved in financing.
Collin (1998) defined Public-Private Partnership as an arrangement between a municipality and one or more private firms where all parties were involved in sharing risks, profit, utilities and investments through joint ownership. There are several aspects to this definition. First: it is emphasizing on sharing, such as risk sharing, profit sharing, and sharing of utilities. Second, it underlines the joint ownership of organisations in a PPP project. Finally, the most important aspect is the financial investment of all organisations.
2.3.3 Public Private Partnership (PPP) – A Tool of Development Process
Public Private Partnership (PPP) is emerging as a new development arrangement. The prominent arguments are PPPs maximise benefits for development through collaboration and enhanced efficiency. Thus PPP is seen as a significant method of promoting development and a tool for development (Paoletto, 2000). ADBI studied several public private partnerships programmes in Asia and the Pacific and defines PPP as: ‘collaborative activities among interested groups and actors, based on a mutual recognition of respective strengths and weaknesses, working towards common agreed objectives developed through effective and timely communication. There are several
features in this definition. First, common objectives – partnerships are undertaken for the purposes of implementing objectives that have been agreed to by the groups involved. The objectives are ideally developed through a process of communication and negotiation that is acceptable to all actors involved. Second, agreement to undertake activities means that there will be specific commitment to undertake activities and these activities will be built on each partner’s strengths. Third, actions of these PPP will be to overcome weaknesses of each partner – overcoming apparent weaknesses may involve a sharing of expertise, knowledge or experiences by one or more groups amongst the other groups. It also means first recognising the weaknesses. Finally, actors in this process of partnership may include different community groups such as NGOs, local governments, research and developments institutes, and national governments. The World Bank’s definition of PPP is closely aligned to that of the ADBI. The World Bank (1999) defines PPP as joint initiatives of the public sector in conjunction with the private, for profit and not-for-profit sectors, also referred to as the government, business and civic organisations. In these partnerships,
each of the actors contributes resources (finance, human, technical and intangibles, such as information or political support) and participates in the decision making process.
2.3.4 Public Private Partnership (PPP) – a Language Game Another alternative view of PPP is as a language game. The language of PPP is a game
designed to ‘cloud’ other strategies and purposes. One such purpose is privatisation and the encouragement of private providers to supply public services at the expense of public organisations. Privatisations are terms that generate opposition quickly and that expression such as ‘alternative delivery system’ or PPPs are more acceptable. Savas (2000) considers that now PPPs enable private organisations to get a market share of public service provision; however, he states that ‘PPPs invite more people and organisations to join the debate’. Thus, Teisman and Klijn (2002) and Savas (2000) writing from different perspectives, all agree that the use of the term ‘public–private partnership’
(PPP) can be seen as a pejorative term like ‘contracting out’ and ‘privatization’.
2.4 TYPES OF PUBLIC-PRIVATE PARTNERSHIPS
There are various types of public private partnership which have been described by various authors but in this study, public private partnership types are seen in the view of United States General Accounting Office Glossary (1999) to include:
2.4.1 Build-Own-Operate (BOO): Under a BOO transaction, the contractor constructs and operates a facility without transferring ownership to the public sector. Legal title to the facility remains in the private sector, and there is no obligation for the public sector to purchase the facility or take title. A BOO transaction may qualify for tax-exempt status as aservice contract if all Internal Revenue Code requirements are satisfied.
2.4.2 Build/Operate/Transfer (BOT) or Build/Transfer/ Operate (BTO): Under the BOT option, the private partner builds a facility to the specifications agreed to by the public agency, operates the facility for a specified time period under a contract or franchise agreement with the agency, and then transfers the facility to the agency at the end of the specified period of time. In most cases, the private partner will also provide some, or all, of the financing for the facility, so the length of the contract or franchise must be sufficient to enable the private partner to realize a reasonable return on its investment through user charges. At the end of the franchise period, the public partner can assume operating responsibility for the facility, contract the operations to the original franchise holder, or award a new contract or franchise to a new private partner. The BTO model is similar to the BOT model except that the transfer to the public owner takes place at the time that construction is completed, rather than at the end of the franchise period.
2.4.3 Build Operate (BBO): A BBO transaction is a form of asset sale that includes a Buy rehabilitation or expansion of an existing facility. The government sells the asset to the private sector entity, which then makes the improvements necessary to operate the facility in a profitable manner.
2.4.4 Contract Services Operations and Maintenance: A public partner (federal, state, or local government agency or authority) contracts with a private partner to provide and/or maintain a specific service. Under the private operation and maintenance option, the public partner retains ownership and overall management of the public facility or system, but the private party may invest its own capital in the facility or system. Any private investment is carefully calculated in relation to its contributions to operational efficiencies and savings
over the term of the contract. Generally, the longer the contract term, the greater the opportunity for increased private investment because there is more time available in which to recoup any investment and earn a reasonable return. Many local governments use this
contractual partnership to provide wastewater treatment services.
2.4.5 Design-Build-Operate (DBO): In a DBO project, a single contract is awarded for the design, construction, and operation of a capital improvement. Title to the facility remains with the public sector unless the project is a design/build/operate/transfer or design/build/own/operate project. The DBO method of contracting is contrary to the separated and sequential approach ordinarily used in the United States by both the public and private sectors. This method involves one contract for design with an architect or engineer, followed by a different contract with a builder for project construction, followed by
the owner’s taking over the project and operating it.
A simple design-build approach creates a single point of responsibility for design and construction and can speed project completion by facilitating the overlap of the design and construction phases of the project. On a public project, the operations phase is normally handled by the public sector or awarded to the private sector under a separate operations and maintenance agreement. Combining all three phases into a DBO approach maintains the continuity of private sector involvement and can facilitate private-sector financing of
public projects supported by user fees generated during the operations phase.
2.4.6 Developer Financing: Under developer financing, the private party (usually a real estate developer) finances the construction or expansion of a public facility in exchange for the right to build residential housing, commercial stores, and/or industrial facilities at the site. The private developer contributes capital and may operate the facility under the oversight of the government. The developer gains the right to use the facility and may receive future income from user fees. While developers may in rare cases build a facility, more typically they are charged a fee or required to purchase capacity in an existing facility. This payment is used to expand or upgrade the facility. Developer financing arrangements are often called capacity credits, impact fees, or exactions. Developer financing may be voluntary or involuntary depending on the specific local circumstances.
2.4.7 Enhanced Use Leasing (EUL): A EUL is an asset management program in the Department of Veterans Affairs (DVA) that can include a variety of different leasing arrangements (e.g., lease/develop/operate, build/develop/operate). EULs enable the DVA to long-term lease DVA-controlled property to the private sector or other public entities for non-DVA uses in return for receiving fair consideration (monetary or in-kind) that enhances
DVA’s mission or programs.
2.4.8 Lease/Develop/Operate (LDO) or Build/Develop/Operate (BDO): Under these partnership arrangements, the private party leases or buys an existing facility from a public agency; invests its own capital to renovate, modernize, and/or expand the facility; and then operates it under a contract with the public agency. A number of different types of municipal transit facilities have been leased and developed under LDO and BDO arrangements.
2.4.9 Lease/Purchase: A lease/purchase is an installment-purchase contract. Under this model, the private sector finances and builds a new facility, which it then leases to a public agency. The public agency makes scheduled lease payments to the private party. The public agency accrues equity in the facility with each payment. At the end of the lease term, the public agency owns the facility or purchases it at the cost of any remaining unpaid balance in the lease. Under this arrangement, the facility may be operated by either the public agency or the private developer during the term of the lease. Lease/purchase arrangements have been used by the General Services Administration for building federal
office buildings and by a number of states to build prisons and other correctional facilities in the USA.
2.4.10 Sale/Leaseback: A sale/leaseback is a financial arrangement in which the owner of a facility sells it to another entity, and subsequently leases it back from the new owner.
Both public and private entities may enter into sale/leaseback arrangements for a variety of reasons. An innovative application of the sale/leaseback technique is the sale of a public facility to a public or private holding company for the purposes of limiting governmental liability under certain statutes. Under this arrangement, the government that sold the facility leases it back and continues to operate it.
2.4.11 Tax-Exempt Lease: Under a tax-exempt lease arrangement, a public partner finances capital assets or facilities by borrowing funds from a private investor or financial institution. The private partner generally acquires title to the asset, but then transfers it to the public partner either at the beginning or end of the lease term. The portion of the lease payment used to pay interest on the capital investment is tax exempt under state and federal laws. In the USA, tax-exempt leases have been used to finance a wide variety of capital assets, ranging from computers to telecommunication systems and municipal vehicle fleets.
2.4.12 Turnkey: Under a turnkey arrangement, a public agency contracts with a private investor/vendor to design and build a complete facility in accordance with specified performance standards and criteria agreed to between the public agency and the private investor/vendor. The private developer commits to build the facility for a fixed price and absorbs the construction risk of meeting that price commitment. Generally, in a turnkey transaction, the private partners use fast-track construction techniques (such as designbuild) and are not bound by traditional public sector procurement regulations. This combination often enables the private partner to complete the facility in significantly less time and for less cost than could be accomplished under traditional construction
techniques.
In a turnkey transaction, financing and ownership of the facility can rest with either the public or private partner. For example, the public agency might provide the financing, with the attendant costs and risks. Alternatively, the private party might provide the financing capital, generally in exchange for a long-term contract to operate the facility.
2.5 FORMS OF PUBLIC PRIVATE PARTNERSHIPS
According to the NASCIO issue brief (2006), public-private-partnerships can take various forms and include both collaborative (non-legal binding) or contractual (legally binding) agreements.
2.5.1 Contractual Partnerships: The Traditional View Depending on the type of contract, the following levels of contractual partnerships exist:
2.5.1.1 Time and Materials (T&M): Under this type of contractual partnership, the public sector customer has the most control during the term of the relationship. There are no performance-based measured outcomes; thus, performance thresholds have not been identified, and there are no reporting mechanisms for performance.
2.5.1.2 Firm Fixed Price (FFP): Under this type of contractual partnership, the public sector customer has less control and must define the deliverable for the contractor. Outcomes are identified as “deliverables”, and typically not in the form of metrics nor are they measured during the course of the contract. There is a desired “to-be” state in mind, but uncertainty regarding “how” to reach those outcomes is assumed by the private sector supplier.
2.5.1.3 Performance Based: This type of contractual partnership is actually a marriage of T & M and FFP with joint solution design meetings and mutually agreed upon Service Level Agreements (SLAs). Performance thresholds and reporting mechanisms are jointly established between public sector customer and private sector supplier, there are stated objectives and outcomes by the public sector, and performance is measured on a predetermined and consistent basis.
2.5.1.4 Shared-in-Services Savings: Under this type of contractual partnership, the public sector customer has relinquished control to the private sector supplier and the private sector supplier assumes most or all of the risk in this contractual scenario. This arrangement is usually referred to as an A-76 in the federal government – a total outsourcing arrangement. The private sector supplier has the most control and the public sector customer should justify this arrangement by knowing their total cost of ownership of doing this business before outsourcing.
2.5.2 Collaborative Partnerships
Collaborative partnerships are non-legal working relationships that often occur between the public and private sectors to meet a common objective or goal. Primarily goodwill gestures, collaborative partnerships are often used to provide knowledge exchange or collective leverage resources for a specified goal. It is not uncommon for technology firms and state IT organizations to collaborate to explore new technology that mutually benefits both parties. For example, organizations often establish an advisory board, stakeholder group or governance body which includes private sector representatives. These groups
may be formed to assist with strategic planning, to provide on-going expertise and guidance, or to target specific issues or projects. These bodies may be standing committees or they may be task forces, convened for short term, tactical purposes. No matter what the title or structure of these entities, they create an environment to foster collaboration and partnerships. These collaborative efforts provide an open forum for both public and private entities to exchange ideas and promote the interest of the technology community and government to provide better services and meet new citizen demands.
2.6 BENEFIT AND RISKS ASSOCIATED WITH PPP PROJECTS
The decision to enter into a PPP arrangement according to The Guardian (2011) is driven by two major criteria:
- Will the quality of service provided by the private sector continue to meet/exceed government and he general public’s expectations?
- Will the service provision provide value for money or both the government and
general public?
For the government, value for money will be achieved if the provision of services under private sector management results in cost savings and improves service quality to the general public.
2.6.1 Benefits associated with PPP to the public sector
a) Transfer of financial and non financial risks: A core principle of any PPP
arrangement is the allocation of risk to the party best able to manage it, at the
least cost Under PPP, the government is able to outsource the construction and
management risks to the private sector, but can withhold service payments and
apply financial penalties (liquidation damages) if the private sector fails to meet agreed service quality levels. Initial PPP projects in UK; and Australia saw
governments attempt to transfer an excessive proportion of risk to the private
sector, which unreasonably threatened the financial viability of the projects. More recent deals seek an optimal, rather than excessive risk transfer arrangement.
b) Cost Savings: Governments (globally) are traditionally poor at procuring
infrastructure services and a result cost blowouts are common with public or
assets. The private sector is much more expensed in managing costs.
c) Enhanced asset quality and service levels provided to the public: The private sector remains responsible for ensuring that the public asset and services livered meet certain quality benchmarks throughout the life of the PPP agreement, Therefore, it is in their interest to ensure that the assets are constructed to a high quality standard, utilizing the best technology so as to minimize the re maintenance costs. PPP contracts also typically include conditions requiring the private operator to upgrade the facilities throughout.
Unless specifically dealt with in the contract, upgrading to satisfy these benchmarks is typically funded by the private sector.
d) Government expenditure: PPP frees up fiscal funds for other areas of public
expenditure and proves cash flow management as the periodic vice payments over the life of the agreement lace the significant up-front capital expenditure as well as recurring expenditure for maintenance. This also has obvious accounting
Benefits; the asset is off balance sheet.
2.6.2 Risks Associated with PPP to the Public Sector
a)Risk of private sector failure: In this instance, the PPP contract with the private operator is either terminated or suspended, resulting in the government being forced to step in and recommence providing the services to the public. This
normally results in public criticism and further financial loss. It is therefore
imperative that the government is knowledgeable and confident that all parties involved in the private sector consortium are sufficiently competent and financially capable of delivering services to the predetermined specifications.
b)Risk of service quality standards falling: In general, government largely
overcomes this by retaining the right to withhold service payments if service quality levels are not met over the whole life of the contract. In most PPP contracts, the payment mechanism will include a series of deductions that can be made by the government depending on the severity of the service quality breach. For assets where private sector revenue is levied directly on the general public users, falling service quality standards remain a risk Political Public sector employees who are either forced to move into the private sector or become unemployed (supported by their representative trade unions) may present a significant obstacle to PPP projects.
c)Private sector monopolies forming: Where certain companies secure a series of major PPP contracts in any given sector, there is a risk that monopolies may form, resulting in potential price manipulation and lower standards of service quality to the general public users.
2.6.3 Benefits Associated with PPP to the Private Sector
Projects that can deliver reasonable profits: PPP provides the private sector with access to large scale public construction projects that, if priced accurately and costs managed effectively can deliver reasonable, long term revenue and profit. In addition, most PPP arrangements allow for incentive payments based on a range of preagreed criteria. To ensure the financial stability of private sector participants in PPP projects, it is critical that the government considers the profitability requirements of the companies involved in the private consortium.
2.6.4Risks associated with PPP to the private sector
a) Revenue risks: For projects where the key source of revenue to the private operator is generated from tariffs {tolls and charges} levied on asset or service usage (e.g. roads, rail, water, energy), historical and future usage patterns and permitted tariff charges will be the factors in determining overall project profitability. There are often practical difficulties in forecasting usage (e.g. when new competing infrastructure is built) and political difficulties in rising tariffs. In the event that services provided fail to meet quality standards, the government may withhold payment and/or impose liquidated damages.
b) Financing risks: Construction or acquisition public sector assets normally requires high levels of debt Under PIT, this can be a mix of public and private debt but in all cases the private debt funding component must and will be higher than the public component. Interest rates for private sector funding are normally higher than public sector borrowing rates. Loan term facilities are commonly extended for 25-30 years.
However, refinancing may expose the private sector consortium to certain interest rate risks. In the event of a major problem on the project, financiers may call for partial or full repayment of debt and therefore challenge the going concern status of the project.
c) Delayed cash inflow: The SPV will not usually begin to receive payments or tariff revenue until the asset is completed and service is provided at a level of quality that meets government expectations. Therefore the construction must be completed as quickly as possible, but also at a high quality standard so that future maintenance costs are minimized.
d) Dispute resolution: Generally, most PPP contracts enable governments to step-in and assume direct responsibility for service delivery in the event that the private sector fails to meet agreed service levels. However, experience has shown that governments have often been less successful than the private sector in resolving the crises and in some cases have contributed to deterioration in operating and financial performance. The allocation of financial liability becomes difficult and the private sector may be held liable for further losses generated under the government’s management. The private sector will often seek to mitigate their exposure by imposing cure rights in the concession agreement, such that governments agree to reduce the liability of the operator to the extent that they are directly responsible for the loss or damage following a step-in scenario.
e) Other unforeseen risks: Prior to entering into any long term PPP contract, the private sector participants, must ensure that they understand all the risk that are faced and have priced them accord. They must try to avoid accepting response risks that are not within their control that the service payment price or tariff revenue is adequate to cover all unforeseen additional future costs. The definition and recourse for regulatory changes (e.g. environmental) and other force majeure events must be clearly addressed in the legal agreements.
2.7 THE LEKKI CONSERVATION CENTRE (LCC)
Lekki Conservation Centre is one of Nigeria Conservation Fund (NCF) project site located in the renowned Lekki Peninsula. LCC covers land area of 78 hectares, administratively situated in Eti-Osa Local Government of Lagos State (www.tripadvisor.com).
2.7.1 How LCC started
The establishment of LCC was born of Nigeria conservation fund (NCF), relentless commitment to conservation of Nigeria’s vast natural resources. The commitment was heightened by the presence of its national secretariat in Lagos, thus warranting the need to have a conservation project site within Lagos metropolis that will serve as biodiversity conservation icon degradation of the city’s remaining natural environment fragment due to ceaseless urbanization; thus making LCC one of the few natural environments remaining in the city.
To move the idea of conservation project off ground, three potential areas were
surveyed in 1987 by NCF technical team in partnership with the defunct Lagos
State Ministry of Agriculture and cooperative. Thereafter, Lekki area was selected to establish the demonstration site for the conservation project. Locating the project on Lekki peninsula informed the name of the project – Lekki conservation centre.
The task of sourcing a suitable site for conservation project was not an end in itself as significant financial resources was require to acquire the 78 hectares of land. This daunting task may not have been possible save for the generous financial support of the two old giants that later merged into one formidable entity chevron Nigeria Limited has been LCC’s benefactor from inception till date.
(www.ncfnigeria.org)
2.7.2 The purpose of LCC
LCC was solely established to serve as a conservation icon of Nigeria’s southwest
coastal mangrove resources and an information centre for environmental education centre for environmental education and awareness-raising (www.ncfnigeria.org).
2.7.3 Project profile and organizational structure
LCC is managed by a project coordinator who is able supported by education
officers, game guards and auxiliary staff. Aside permanent project staff, some NCF staff such as account officer and Technical Programme Department (TPD) staff play secondary role in LCC management.
LCC’s 78 hectare land area is craftily divided into two sections: LCC complex and the nature reserve. The LCC complex comprises of stroking multi-purpose rotunda surrounding by four office blocks. The office blocks contain project staff officers, gift shop, canteen and the drivers’ office. The facilities of the LCC complex area were expanded in 1998 with the construction of the national secretariat at the rear of LCC complex. A trail boardwalk was constructed in 1992 to the enrich tourists visitors view of the vast resources of the nature reserve which is encapsulated on a mangrove terrain. The trail stretches a length of two kilometers. Some of the side attractions along the trail are swamp outlook, bird hide; rest shops and the tree
house. (www.ncfnigeria.org)
2.7.4 The role of Chevron in the management of the Lekki Conservation Centre
Apart from being the benefactor of the project from inception, Chevron also came to the rescue of the Lekki Conservation Centre when the initial boardwalk which was constructed in 1990 to ease access into the natural environment was built. The initial trail boardwalk constructed in 1990 for easy access into the nature’s reserve was built. In 1997, it underwent a substantial maintenance from time to time. In 2002, a major maintenance took place to boost the shell life of the trail. All these
maintenance activities lasted till 2006 when the trail began to fall apart. There and then, the uncompromising call for financial rebirth was not devoid of huge financial demand. Attempts to outsource support to reconstruct the trail boardwalk proved abortive, Chevron, the sole benefactor of the reserve were later approached. The call was promptly attended to and a sum of N40.8million was again donated by Chevron to reconstruct the trail. Thus the old trail boardwalk which was a major concern due to its dilapidated state was completely reconstructed through funds provided by Chevron – LCC financial partner. (www.ncfnigeria.org)
5.0 SUMMARY OF FINDINGS, RECOMMENDATION, CONCLUSION
5.1 SUMMARY OF FINDINGS
Based on the analysis of the available data for this study, below are summary of the findings:
i. It was discovered that the knowledge of the populace on the public private
partnership concept is below expectation. Even some of the professionals
interviewed displayed low level awareness on the concept.
ii. It was also discovered that levying the tariffs on the users was being kicked against despite accepting that the concept is a credible way of providing and managing public infrastructures.
iii. The research also reveals that there is no alternative route to the public partnership procured Lekki-Epe expressway and this is against the basic rules of the concept as toll roads ought to be an alternative route to an already existing one which might be plagued by all sort of difficulties such as traffic, bad state of repairs, non-affordabilityof the imposed toll tarrif, etc.
iv. It was also discovered that the major factor that affects public private partnership mostly is accessibility to finance.
v. From the research, it was also evident that the quality of the project is the most
appropriate performance measures in determining the success of public private
partnership procured project whilst not undermining the time of completion.
vi. The research revealed that levying of tariffs on users is a major source of nonsupport for the concept while the receipt of periodic service payment from the government is the most appropriate method to remunerate the private partner.
5.2 RECOMMENDATIONS
From the research findings, certain factors mitigate against proper and positive impact on the administration of the public private partnership concept in Nigeria. In accordance to this, the following recommendations are postulated:
- There should be adequate enlightenment of the public including users, the
professionals in the building industry and allied professionals on the concept and its administration. - Whenever levying of tariffs is being selected as the mode of remuneration to the private sector, in public private partnership administration, there should be an alternative service or project without the levying of tariffs.
- Adequate measures should be taken by the government in selecting a credible private sector partner who is credit worthy and will deliver the project within a specified time, benchmarked quality and a reasonable cost.
- A proper feasibility and viability appraisal should be carried out before administering the concept on any project.
5.3 CONCLUSION
The chief goal of this research is to provide an insight into the relevance of public private partnership in the management of natural endowment, basically land and its infrastructures. From the literature review, data analysis, the research have been able to provide a deep understanding of public private partnership concept, types/nature of PPP and how it is being administered. There is adequate need for enlightenment of Nigerians including professionals, private developers and the public sector on the concept and the effective administration of the scheme. It is an established fact that public infrastructure when properly supplied and managed do enhance property value and thus, provision, sound management and adequate maintenance is of paramount importance to public infrastructures.
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