Abstract
The social contract requires governments to provide for the citizens' basic needs such as infrastructure and services or create an enabling environment for these needs to be provided to promote development. One of the ways for governments to achieve this goal is to embark on a public-private partnership project.
Public Private Partnership (PPP) is a partnership between the public sector and the private sector for the purposes of delivering a project or service traditionally provided by the public sector. The Partnership is usually a long-term contract involving funding, planning, building, operation, and maintenance with risk and reward sharing between the parties aimed at delivering a desired policy outcome. Risk is allocated to the party best able to control and manage it to deliver value for money.
PPP projects are found in sectors such as transportation, power & energy, telecommunications, healthcare, social infrastructure, etc
The World Bank PPP Knowledge Resource Lab Centre defines a PPP agreement as “a long-term contract between a private entity and a government entity for providing a public asset or service in which the private party bears a significant risk and management responsibility”
PPP projects may either be at the initiative of the public sector or at the private sector's initiative in which it becomes an unsolicited proposal to be determined for acceptance or rejection.
Despite the several benefits of PPP such as technical expertise, efficiency, and resources of the private sector coupled with the protection of the public interest, it may not always be the panacea for all public sector funding and infrastructure gaps.
There are challenges such as uncertainty associated with the long-term nature of the agreements, lack of commitment of resources by the government, and too much government interference undermining the efficiency and continuity of the process and project.
Benefits of PPP
PPP allows access to private sector financing and enables the public sector to achieve more of its goals without incurring additional costs.
There is increased transparency in the use of funds with the involvement of the private sector and value for money not only in terms of cost but also in qualitative terms.
The public sector transfers risk to the private sector because the private sector has the incentive to minimise risk and maximise profits.
PPP Project Delivery Models
There are several models based on funding and which partner is responsible for owning and maintaining assets at different stages of the project. The models include the following;
- Design-build-finance-operate (DBFO)
The private sector designs, finances, and constructs the infrastructure project and owns the operations and maintenance under a long-term lease. When the lease is up, the private entity transfers the property to the public sector.
- Build- own-operate-transfer (BOOT)
The private sector finances, designs, builds, and operates, and charges user fees in some instances, for an agreed duration after which ownership is transferred back to the public sector.
- Build-lease-operate-transfer (BLOT)
The private sector designs, finances, and builds a facility o leased public land. The private sector operates the infrastructure for the duration of the lease of the land. When the lease expires, the project is transferred to the public sector.
- Operation License
The private entity is granted a license or other expression of legal permission to operate a public service usually for a specified term. This is often used in IT Projects.
- Operation and Maintenance Contract (O & M)
The private sector under contract operates a publicly owned -asset for a specific period. The Public then retains ownership of the assets.
Objectives of Act 2020, (Act 1039)
The objects of the Act are to regulate public-private partnership arrangements and to promote the use of private sector resources for the provision of infrastructure and services.
The Act provides for exemptions as follows;
- Outsourcing of government services which does not transfer the financial and operational risks to a private party.
- The grant of mineral rights under the Minerals and Mining Act, 2006 (Act 703)
- The grant of rights for exploration or production under the Petroleum (Exploration and Production) Act 2016, (Act 919)
- Non-commercial activities that are the exclusive preserve of the security services in Ghana
Institutional arrangements for PPP
The Act provides that Parliament shall be the final approving authority for a PPP Project that requires the approval of Parliament in accordance with Article 174 and Article 181 of the Constitution as well as Section 33 of the Public Financial Management Act, 2016 Act 92.
The Controller and Accountant General’s Department shall ensure that transactions relating to PPP projects are covered in the national accounts. The Auditor-General shall carry out an annual compliance audit to ascertain compliance of a public institution to the provisions of the Act, the Regulations, and Guidelines.
The Act establishes the PPP Committee to consider and approve requests of public institutions to undertake PPP projects and to consider requests relating to unsolicited proposals among others.
The Act also establishes a Fiscal Commitment Technical Committee which serves as a technical advisory committee to the PPP Committee making recommendations based on the assessment of fiscal risk among others.
The PPP Process
The PPP process comprises three (3) stages;
- The project preparation stage
- The procurement stage
- The contract and post-contract award management stage
The procurement process shall be open, competitive, transparent, cost-effective, equitable, and fair.
A partnership project may be procured through the Ghana Infrastructure Investment Fund where the use of a competitive solicitation method proves unsuccessful eg in the cancellation of a tender or where there is an urgent need for execution of a potential partnership project to serve the strategic national interest.
The governing law of any PPP agreement shall be the laws of Ghana but parties shall determine the place of arbitration for the agreement.
Unsolicited proposal
The Act provides for unsolicited proposal which is a proposal made by the private party to undertake a partnership project and submitted at the initiative of the private party rather than in response to a request from a public entity.
An unsolicited proposal must demonstrate innovation and not place onerous responsibility on government and must be consistent with;
- Clause 5 of Article 36 of the Constitution
- The National Medium Term Development Policy Framework or the National Infrastructure Plan
- And must not have been already considered by the public entity for implementation as part of its PPP pipeline of projects
Complaint Panel
The Act also establishes a complaint panel for the bidding process to resolve complaints within 60 days of receipt. A person aggrieved by an order or decision of the complaints panel may appeal to the high court within 30 days after the receipt of that order or decision.
Dispute Resolution
The Act empowers the parties to determine in their agreement, the dispute resolution mechanism by which all disputes arising between them shall be settled or by default, the Alternative Dispute Resolution Act, 2010 (Act 798) shall apply.
Government Support Mechanisms
The Act establishes a Project Development Facility which shall be a revolving fund to be used to finance the following;
- Project preparation
- Project structuring and procurement of private party
- Project management, monitoring and evaluation
- Public investment management capacity building
- The public investment management system
- Transaction advisory services
The Act also establishes a Viability Gap Facility to provide financial support to projects which are technically, economically, socially, and environmentally viable but are not financially viable
Challenges of PPP Projects
- PPP projects are often complex with multiple stakeholders involved in decision making-making process which may result in decisions for political reasons rather than what is best for the project.
- Too much government involvement tends to undermine the efficiency and continuity of the process and the project.
- Lack of a strong private sector may be a challenge to achieving the local content and technology transfer provisions.
- Non-disclosure on the cost of projects defeats the provisions on accountability and transparency.
- Due to its usually long-term nature, getting out of an agreement that later proves to be disadvantageous can be challenging
- There is also a high risk of cost overruns and schedule delays
Conclusion
The PPP Act, 2020 Act 1039 gives effect to the synergy created by harnessing the strengths of both the public sector and the private sector in the provision of infrastructure traditionally provided by the public sector and also protects both parties in the event of a breach of the agreement by one party.
In this regard, lawyers in drawing up the agreement must ensure that each party’s interests, rights, and responsibilities are duly covered as provided in the Act, Regulations, and Guidelines.
Reference
- Public Private Partnership Act, 2020 (Act 1039)
- 1992 Constitution of the Republic of Ghana, Article 174
- 1992 Constitution of the Republic of Ghana, Article 181
- 1992 Constitution of the Republic of Ghana, Article 36
- Public Financial Management Act, 2016 (Act 921) Section 33
- ppp.worldbank.org
