Civil Engineering August 2022 | Vol 30 No 7

24 August 2022 Civil Engineering I ndustry Perspec t i ve A lthough there is no standard definition for public-private partnerships (PPPs) the following is a useful description: “A PPP is a long term asset or service delivery agreement established be- tween the public and private sector with the aim of achieving economic development by taking advantage of the private sector’s qualifications as well as its capital.” In addition, that: “PPP is a project finance funding method with payments from the users during the determined conces- sion period and enables transferring of the asset or service to the public at the end of the concession period.” 1 THE HISTORICAL CONTEXT OF PPP CONTRACTS Partnerships between the public and pri- vate sectors have been used for a very long time, such as for Roman corn distribution during the days of the Roman Empire. The 19 th century was the golden age of concessions in Europe. One of the most renowned cooperations between the public and private sectors was the concession granted in 1854 for the construction and op- eration of the Suez Canal. 1 Closer to home, a 99-year concession to construct and operate the Benguela Railway line was granted to Sir Robert Williams on 28 November 1902. Although this implementation model has a long history, the acronym PPP only gained currency during the 1970s. PPPs have been widely adopted as a project implementation strategy throughout Africa and enabling legislation and standard documentation is available in 50 African countries (out of a total of 54). Despite their potential, PPPs in African countries currently face many constraints 2 , such as: Q Q Undeveloped business environments Q Q Lack of knowledge to carry out PPP projects Q Q Lack of legal and regulatory framework Q Q The reluctance of investors due to the expectation of assumption of major risks Q Q The small role of Africa in the global market, and especially in the underde- veloped infrastructure and financial markets. DESCRIBING PPPs Figure 1 outlines a typical PPP contract structure. PPP contracts require: 2 Q Q The involvement of the private sector providing public services/assets Q Q A long-term relationship Q Q The distribution of risks between the public partner and private partner aiming to achieve optimal risk allocation Q Q The bundling of different project phases Q Q The use of private funds and in some situations, the use of project finance mechanisms. In South Africa the implementation models have been: 4 Q Q Design Finance Build Operate Transfer (DFBOT) Q Q Design Finance and Operate (DFO) Q Q Design Build Operate and Transfer (DBOT) Q Q Equity partner projects Q Q Facility management projects. In summary, there are generally six typ- ical forms of private sector involvement: 2 1. Short-term service contracts 2. Management contracts 3. Lease contracts 4. Greenfield projects (commonly Build Operate Transfer) 5. Concessions 6. Divestitures. COMPARING TRADITIONAL PUBLIC PROCUREMENT AND PPPs 5 Traditional public procurement of infrastructure is typically financed using taxpayers’ money and the objective of is to achieve value for money. Therefore, any project, whether it is a PPP or a tradition- ally procured project, should be under- taken only if it creates value for money. How do we define value for money? Good value for money consists of three constituent components: Ian Massey CEng, FICE FIDIC President’s List Adjudicator ICE-SA NEC Adjudicator Director: MDA Consulting imassey@mdaconsulting.co.za Understanding the use of PPPs for infrastructure projects in Africa Figure 1 A typical PPP contract structure 3 PPP contract