Post on 17-Dec-2015
Tools…
•Goods and Services•Direct Loans•Income Support…
Direct Government
•Contracting•Grants•Loan Guarantees•Insurance…
Indirect Government
PPP
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Public Private Partnership
• long-term arrangements in which the governments purchases services under a contract either directly or by subsidizing supplies to consumers …the government bears substantial risks - for example, by guaranteeing revenue or returns - on projects that sell directly to consumers
World Bank
• Among other things, PPP is a procurement decision
• As a procurement decision, PPP attempts to find answer to the question– Should Govt provide service “x” on its
own in the traditional format or – should Govt. enter into a partnership
with the Private Sector to fulfill its commitment
Decision dimensions
• Expertise• Political – [encourage Pvt Sector]• Philosophical – [reducing role of govt]• Resources – [Human]• Resources – [Time]• Resources – [Funds]
YearCosts incurred/
Investments made by Government
Costs incurred / Investments made by
Government
[a] [conventional] [Under PPP]
[b] [e]
o 1,000 0
1 900 1,250
2 900 1,250
3 900 1,250
4 900 1,250
5 1,500 1,250
Time Value of Money
• How to calculate NPV?
Ct
NPV = ∑----------- (1+i)t
– Ct = Amount of Cash flow (inflow – outflow)
– i = discount rate (or rate of return that could be earned on an investment)
– t = time of the cash flow (year 1, year 2…)
Exercise…NPV analysis
YearCosts incurred/
Investments made by Government
Costs incurred / Investments made by
Government
[a] [conventional] [Under PPP]
[b] [e]
o 1,000 0
1 900 1,250
2 900 1,250
3 900 1,250
4 900 1,250
5 1,500 1,250
Derivation of discount rate / return on capital
• Required return is the sum of the risk-free rate of interest and a compensation for bearing risk.
Value for Money
• VfM is defined as “the optimum combination of the whole of life cost and quality (or fitness for purpose) of the good or service to meet the user’s requirements”.
• It is linked in many ways to cost-benefit analysis.
• VfM may include benefits that are not monetized (as it is not always easy to do so).
1 2 3
Prog A [eGov based child and women care right up to village level]Total Cost 1600 2100 2600Lives Saved/value of lives saved 120 243 485
Prog B [eGov based child and women care right up to district level]Total Cost 2000 2375 1100Lives Saved 50 216 432
Prog C [additional training without any major expansion]Total Cost 500 525 50Lives Saved 50 90 179
Discount Rate 4 8 12
Exercise…Perform Cost effectiveness analysis
1 2 3
Prog A [eGov based child and women care right up to village level]
Total Cost 1600 2100 2600
Lives Saved/value of lives saved 120 243 485
Prog B [eGov based child and women care right up to district level]
Total Cost 2000 2375 1100
Lives Saved 50 216 432
Prog C [additional training without any major expansion]
Total Cost 500 525 50
Lives Saved 50 90 179
Discount Rate 4 8 12
Present value of Costs
Program A 5,791 5,346 4,953
Program B 5,097 4,761 4,462
Program C 1,011 953 901
Discounted Lives/value of lives Saved
Program A 682 641 604
Program B 607 570 537
Program C 252 237 223
Cost per 'life' saved
Program A 8,491 8,342 8,206
Program B 8,395 8,348 8,305
Program C 4,010 4,024 4,037
Cost effectiveness analysis
• Coordinating work effectively often turns out to be much harder than dividing it.
• Partnerships are one of the coordinating devices
• The choice of tools is a difficult cultural / political / Legal / economic decision. Decisions should be taken only after DETAILED analysis