e-Government And Public Private Partnership (PPP)

By Jamil Warraich (Director PMO), National Information Technology Board (Government of Pakistan)

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National Information Technology Board M/o Information Technology & Telecom

Government of Pakistan

A BRIEF

ON

PUBLIC PRIVATE PARTNERSHIP MODEL FOR e-GOVERNMENT


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Contents 1 INTRODUCTION ........................................................................................................................ 3

2 BENEFITS OF PPP IN ICT FOR THE STAKEHOLDERS ......................................................... 4

3 POLICY OBJECTIVES AND ISSUES IN PPPs FOR E-GOVERNMENT .................................. 4

4 POTENTIAL APPLICATIONS OF PPPs AT ALL LEVELS OF E-GOVERNMENT ................... 5

5 WHY PPP MODEL IN E-GOVERNMENT AND ICT DEVELOPMENT? .................................... 6

6 MODELS OF PPP FOR E-GOVERNMENT PROJECT ............................................................. 8

7 LEGAL AND REGULATORY PREREQUISITES FOR PPPs IN E-GOVERNMENT ............... 10

8 INSTITUTIONAL ROLE AND RESPONSIBILITY FOR PPPs IN E-GOVERNMENT .............. 10

9 POLITICAL CONSTRAINTS & CHALANGES TO PPPs IN E-GOVERNMENT ...................... 11

10 RISKS ASSOCIATED WITH PPPS FOR E-GOVERNMENT .................................................. 12


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1 INTRODUCTION

Globalization, citizen demands, lack of resource and skills, and rapid

changes in technology have put immense pressure on the governments of developing

countries to have change in their traditional bureaucratic business processes through e-

governance to pace with the changing global environment. Governments and other

development actors rely on different sources for funding ICT. Under usual

circumstances, governments depend on funds from the public treasury to finance ICT

infrastructure and service investments such as e-government services. Other

sources of funding exist based on collaboration between the public and private

sectors.

i. Government provides an enabling environment to encourage the

participation and involvement of the private sector in funding and

operating public infrastructure and services.

ii. Collaborative funding model involving the private sector not only to

fund the installation, but also to secure its operation.

iii. Outsource some of the work on contracts but retain all power over design

and implementation as well as operations.

iv. Cede a concession to the private sector for the provision of public services

through a contract based on a public private partnership (PPP).

v. Multi-stakeholder PPP involving several partners from the public and

private sectors as well as others such as NGOs and donors.

vi. Governments can also count on philanthropic contributions from the

private sector. Best sourcing based on market testing is another option.

Governments are employing Public Private Partnership (PPP) as a tool for meeting its

obligations to citizens, which has enabled them to avail themselves a state of the art

technology and private sector expertise, while avoiding excessive strains on already

limited budgets. Citizens enjoy improved service delivery without large tax increases,

and sometimes with decreased user fees, and economic growth flourishes in sectors

seeking to compete for lucrative PPP contracts. While the experience with ICT

infrastructure PPP has been varied, public and private partners alike have learned from

early infrastructure PPPs. The model continues to gain acceptance, and is rapidly

expanding in to all areas of public life in general and in ICT resources and e-government

in particular.


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2 BENEFITS OF PPP IN ICT FOR THE STAKEHOLDERS

There are three key stakeholders at the macro level for PPP in ICT:

i. Citizens/Businesses

ii. Governments

iii. Private ICT sector

Benefits to Citizen/Business

Easy access to services

Single window/one-stop shop

24x7 convenience

Flexibility in the choice of access methods and devices

Saving of indirect cost and hardship

Benefits to Public Sector (Government):

Minimizing financial outlay

Better liquidity

Protection against technology obsolescence

Speedier implementation of e-Government projects

Efficiencies in management

Better image

Benefits to private sector partners:

Reliable streams of revenue

Low risk

Creation of employment in the development,

implementation and delivery

Capturing business from related sectors (wider market initiatives)

3 POLICY OBJECTIVES AND ISSUES IN PPPs FOR E-GOVERNMENT

The policy objectives of PPPs in e-government could include:

Improved efficiency in the delivery of public services or the

performance of public administrative procedures

Expanded access to public services and to public information


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Greater transparency & reduced corruption through improved

access to public information

Improved quality of service by both measuring and achieving key

performance indicators

Reduced costs in the delivery of public services or the execution of

public administrative procedures

The transfer of key risks away from the public sector‟s limited

resources and onto the private party that can best manage them

Maximizing Value for Money through reduced costs and lower risks

to the public sector;

Improved competitiveness of the overall governance and economic

framework;

Improved commercial performance in the delivery of public services

and execution of public administration, such as achieving levels of

cost-recovery specific performance indicators;

Transfer of technology and improved capacity of the public sector to better

manage public services and administrative procedures

The following must be ensured before going for PPPs for e-Government initiatives:

Commitment from executive leadership

A statutory foundation for partnering

Direct public sector involvement

A well-crafted plan

Effective communication with stakeholders

The right opportunity

The right partner

Well-defined management processes

4 POTENTIAL APPLICATIONS OF PPPs AT ALL LEVELS OF E-GOVERNMENT

There are various jurisdictions or “spheres” of government where e-

government PPP‟s can flourish, be it the national, provincial, regional, or district level.

National Level

It is estimated that governments can save lot of public money at the

national level by outsourcing or divesting certain national agency functions or services to


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the private sector via PPP‟s. At the national level, a range of e-government PPPs are

possible including national undertaking by national agencies such as;

e-filing and computerization (Office automation)

ICT infrastructure building

Agency specific applications

Internal Revenue Agencies

e-Procurement and the like.

Provincial Level

At provincial and district level, a number of PPP projects are viable in the

ICT and e-government field. In fact, many innovative projects have been undertaken by

governments at the local level which have “liberated” funding from traditional tax

sources and moved the financing of municipal services “off balance sheet” whilst

improving efficiency such as;

Local issuance of drivers‟ licenses and other motor vehicle services

Voting

Property registration

Utility services

5 WHY PPP MODEL IN E-GOVERNMENT AND ICT DEVELOPMENT?

E-government and ICT projects are natural candidates for PPP. The rationale to

undertake e-government and ICT are compelling. All levels of government require

modernization, new technologies, better efficiency, and improved services for citizens

and customers. However, many of the upgrades and modernization required is not only

capital intensive and expensive, but is also complex to manage and outside of the scope

and skill-set of most government agencies. By having the private sector perform an e-

government or ICT service, on behalf of, the government, a potential “win-win” solution

can be realized where the private sector finances and operates a system, the

government is in a better position to “ensure” effective delivery of the service, and the

customer/citizen is receiving a higher quality service and is engaged more constructively

in customer interfaces with the public sector. However, the following questions must be

kept in view before assessing the e-Government projects for PPP model.

i. What will be the opportunity cost?


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ii. Could the private sector finance the capital investment required to

design, install, and operate an e-government or ICT Project?

iii. Would it be preferable to the public sector financing and operating

the system, thus freeing up public sector resources for projects that

have higher social returns?

iv. Would the private sector be able to manage and operate an e-

government or ICT project, under government supervision or

regulation, more efficiently than the government?

v. How can the government get the highest number of competitive

bids so that PPP‟s in e-government and ICT represent a best value

and a technical innovation?


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6 MODELS OF PPP FOR E-GOVERNMENT PROJECT

Governments are adopting various PPP models for e-Government projects. Some of

these are commonly in practice:

i. Outsourcing (Service Contract)

ii. Management Contracts

iii. Lease

iv. Build Operate Transfer (BOT)

v. Build Own Operate (BOO)

vi. Build Operate Own Transfer (BOOT)

vii. Concession

viii. Design Build Finance Operate

ix. Joint Ventures

x. Private Finance Initiative (PFI)

Following table relates the modalities of the aforementioned contracts

Sr. Type of

Contract

Duration

(Years)

Benefit to Private

contractor

Nature of Private

contractor

Performance

Candidate

Projects for PPP

i. Outsourcing, Joint Ventures

1-3 Fee from government for performing a non-core service

Definitive, often technical type of service

Website design and management, ICT Capacity Building

ii. Management

Contract

3-8 Fee from government

for the service and a performance-based

incentive

Manage the

operation of a government service

Call center staffing;

Seat Management, Parking enforcement,

regional water supply management

iii. Lease 8-15 All revenues, fees or charges from consumers for the provision of the service; the service provider

rents the facility from government

Manage, operate, repair, and maintain, and maybe invest in, a service to specified standards and

outputs

Land for ICT Infrastructure Development, Online property registries, Existing

airport or port facilities

iv. BOO, BOT, & BOOT

15-25 The government mostly pays the service provider on a unit basis

Construct and operate, to specified standards, the facilities necessary

for service provision

ICT Infrastructure; e-procurement systems; e-business portals; Network of

Kiosks v. DBFO, PFI, &

Concession

15-30 All revenues from

consumers service provision; the service provider pays a concession fee to the government and may

assume existing debt

Manage, operate,

repair, maintain and invest in public Service infrastructure to specified standards

Telecom operations

and expansion, New airport or seaport facilities, Toll road or bridge


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Business Models of PPPs for e-Government projects:

The following table reflects some business models for successful PPPs for e-Government

projects:

Sr. PSP Option Outsourcing, Joint Ventures

Management Contract

Lease BOO, BOT, & BOOT

DBFO, PFI, & Concession

i. Financing

investments

Public

Sector

Public

Sector

Public

Sector

Private

Sector

Private Sector

ii. Financing working

capital

Public

Sector

Public

Sector

Private

Sector

Private

Sector

Private Sector

iii. Contractual

relations

with retail

customers

Public

Sector

Private

Sector (on

behalf of

public

sector)

Private

Sector

Public Sector Private Sector

iv. Private-sector

responsibility and

autonomy

Low Low Low to

Medium

Medium to

High

High

v. Need for private

capital

Low Low Low High High

vi. Financial risk for

private sector

Low Low Low to

Medium

High High

vii. Duration of

contract/license

6 month - 2

years

3-5 Years 5-15

Years

15-30 Years 20-30 Years

viii. Ownership

Public

Sector

Public

Sector

Public

Sector

Private then

Public Sector

Public Sector

ix. Management

Private

Sector

Private

Sector

Private

Sector

Private Sector

x. Setting retail tariffs

Public

Sector

Public

Sector

Contract

&

Regulator

Public Sector Contract &

Regulator

xi. Collecting retail

tariffs

Public

Sector

Private

Sector

Private

Sector

Public Sector Private Sector

xii. Main objective

of PSP

Improve

operating

efficiency

Improve

technical

efficiency

Improve

technical

efficiency

Mobilize

private

capital/expert

ise

Mobilize

private

capital/expert

ise


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7 LEGAL AND REGULATORY PREREQUISITES FOR PPPs IN E-GOVERNMENT

International experience has proven that a well designed PPP enabling environment

includes a legal and regulatory framework that clearly articulates government policy on

PPP in e-Government. Specifically, there are critical legal and regulatory prerequisites

that are usually in place in robust e-government PPP programs at any level of

government. These include but are not limited to:

PPP Laws

PPP Central Body

PPP Guidelines

Financial Instruments

Contract Compliance and Dispute Resolution Procedures

Asset Ownership Guidelines

Labor Laws

Tax Laws

Digital Signature Laws

Sector Regulations

Independent Regulator

Competition Law

Stakeholder Consultation

8 INSTITUTIONAL ROLE AND RESPONSIBILITY FOR PPPs IN E-GOVERNMENT

Institutionalizing PPP is the determining factor in the success of PPP projects. As with

any major policy change or initiative, governments must have an institutional strategy to

ensure that the change takes place. PPPs do not just happen. Private investors do not

just come to governments ready to invest, but rather willingly partner with governments

where a clearly identified pathway for institutional collaboration has been established.

There are two main themes to consider when discussing institutional roles in PPP

projects. First, there is the role of independent or departmental PPP institutions in

supporting the development and implementation of projects. Second, there is the role of

the public institution involved in a PPP project, and how it must manage its transition

from service provision to contracting monitoring.

The best way to define clear institutional roles and responsibilities for PPP is to form a

designated department or task force within government. In the case of national level

PPP‟s, the Ministry of Finance is the best place for such a department, as its placement


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clearly communicates to local government and to private investors the national

government‟s commitment to private sector partnerships. Different countries have

established these departments or PPP units worldwide. They range from national level

PPP units, such as Ireland‟s Central PPP Policy Unit and South Africa‟s National Treasury

PPP Unit to provincial level agencies such as Partnerships Victoria in Australia, and the

Gujarat Infrastructure Development Board in India.

9 POLITICAL CONSTRAINTS & CHALANGES TO PPPs IN E-GOVERNMENT

As with any shift in government policy or practice, a number of stakeholder groups will

inevitably resist any change. Employing PPP models for e-Government service delivery is

certainly no exception. PPPs have frequently been the impetus for major political and

social resistance. The following are some of them:

Perceived Misuse of Taxpayer‟s money

Private Profits in Exchange for Service Quality

Past failures in large-scale PPP infrastructure

Past Failures in Technology Investments

Political Elections Cycle

Lack of capacity to develop and manage PPP

Lack of a Public Spokesperson

e-Government PPPs do not have „champions‟ that the more

traditional PPPs have had.

Lack of local private ICT industry


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10 RISKS ASSOCIATED WITH PPPS FOR E-GOVERNMENT The risks associated with PPPs are mentioned in the figure below:

General

( Country )

Risks

Specific

Project

Risks

Political

Risks

Country

Commercial

Risks

Country

Legal Risks

Political Support Risks

Taxation Risks

Expropriation / Nationalization Risks

Forced Buy - out Risks

Cancellation of Concession

Import / Export restrictions

Failure to obtain or renew approvals

Currency Inconvertibility Risks

Foreign Exchange Risks

Devaluation Risks

Inflation Risks

Interest Rate Risk

Changes in Laws and Regulations

Law Enforcement Risk

Delays in Calculating Compensation

Development

Risks

Construction

/ Completion

Risks

Operating

Risks

Bidding Risks

Planning Delay Risks

Approval Risks

Transnational Risks

Delay Risk

Cost overrun risk

Re - performance risk

Completion Risk

Force Majeure Risk

Loss or Damage to Work

Liability Risk

Associated Infrastructure Risks

Technical Risks

Demand Risk ( Volume and Price )

Supply Risk ( Volume and Price )

Cost Escalation Risks

Management Risks

Force Majeure Risk

Loss or Damage to Project Facilities

Liability Risk

Risks Associated with PPPs for

e-Government

e-Government And Public Private Partnership (PPP)

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