Must read article by Rajiv Lall. Surely for people interested in PPP models. Very good points from risk and finance angle and problems todays PPP projects are facing. But there are some serious holes in this approach too - IMHO. 1) That is - who is the transaction adviser and how does this TA get appointed. As in, how does the govt know what it needs to build before it can be handed over to the private guy to maintain. This is a serious problem as I see it, even today. One may say govt knows it needs to build power plants or airports. But that is a very general statement. The devil and disaster is in the details. Govt agencies, in general, dont have the expertise for detailing of these projects. This is where a TA supposed to advise, including helping find the people who can do the various details. First problem is how does govt agency figure out what is a good TA? No specialisation in the subject that govt agency is supposed to handle means bad Terms of References, RFPs, etc. Then you have the tendering process etc. (which may or may not be flexible.) Govt agency cannot just hand over money to the best TA and recruit them. (How will they know which is the best TA when the agency does not have that kind of knowledge of the field to begin with?) I am sure some projects and agencies get good TAs. But what I have seen in govt projects - need not be PPP alone - is that you end up getting a mediocre or bad TA, whose understanding and experience of the subject is suspect, and then rest of the project goes downhill. Outdated concepts, atrocious assumptions and standards etc. Btw, who will manage the TA when he runs amok? You need expertise to begin with to manage a TA, especially when he is mediocre or terrible. Add to this the problems of constant transfers etc. in govt which ensures no institutional knowledge. With no institutional knowledge, what you sometimes end up with is kind of like Regulatory Capture. This time capture by TA, instead of the regulated. By the way, some times these TAs end up becoming permanent fixtures inside a govt agency. 2) Maintenance is not completely plug and play by some new private guy. Take Chennai Airport (CA) as a good example. It is badly done project by a govt agency. (It faced unbelievable delays due to other govt - both state and central - agencies, permissions, etc. One big obstacle was the defense dept in New Delhi. But as the author says it may have been worse, in terms of finance and risk, if it was built by private guys, facing these delays.) CA is not a complete disaster. After all, many flights take off and land there, every day. But look at the details of the construction. I am not even an architect or civil engineer and even I can figure out that it is bad. It is a compromise of many bottlenecks, lack of understanding of issues, lack of expertise in supervision, etc. The same - lack of knowledge in the public agency - problem. So, today if you were to hand it over to a private guy for maintenance, it may be better. But the private guy is not really going to come in with a full understanding of what he is getting into. It may still work, but chances of the private guy losing money, dropping the project and running is high. In some of these projects, the guy who is going to maintain needs to be involved from the beginning. But in this model, or even today, you dont know who that is, this guy comes much later and ends up with the problems. In a not so dissimilar way, this happens in garbage collection. Citys ability to figure out what it wants is lacking. So any PPP model usually involves private guy taking up the project, willfully ignorant or naively ignorant, underestimating the problem, doing a terrible job, and running away. A good, neutral TA would have studied and set up the TOR well, to ensure all bidders have good understanding of the project, plus, govt agency has a good understanding of who is a good bidder and who is trying to take it for a ride. Institutional capacity of govt agencies need to improve. In either models - current and proposed PPP. I can think of some ways, some out of the box ways. But all said and done, if you dont know exactly what you want, or you cant find the right person to help you figure out exactly what you want, then you end up with what you really, really dont want.
Posted on: Sun, 04 Jan 2015 21:21:01 +0000
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