A Case for Project Management Expertise in PPP Projects
BY JAYESH RANJAN, IAS
The Indian economy, despite having the potential, has not been able to grow at a pace higher than the present over the past few decades mainly due to various deficiencies in our basic infrastructure. There is growing realization in the government that it lacks the wherewithal to tackle this enormous challenge on its own, given the serious limitations of resources, manpower, and expertise. Government provisioning of infrastructure on many occasions has also led to faulty pricing and other market distortions. Over the years, the Public Private Partnership (PPP) model has been utilized by governments to seek private sector support in different aspects of infrastructure development, ranging from project designing and funding, to execution and operations and maintenance.
The experience with decades of PPP projects, however, has not been particularly satisfying. With great effort, it would be possible to name just a handful of PPP projects that have seen the light of the day without any disagreements, cost and time overruns, and other contractual problems. There are hundreds of examples of PPP projects that have run into some difficulty or the other.
This phenomenon has been analyzed sufficiently and the main reasons identified. The foremost seems to be the haste with which government agencies offer a project to the market without completing the required background work. Bids have often been called without completing land acquisition, obtaining prior environmental clearances, securing the right of way, or arranging for shifting of utilities, which have led to the private party failing to maintain the work schedule. This leads to both time and cost overruns, and poses a serious implication on project financials.
A related cause has been the absence of a sense of genuine partnership among public agencies. A PPP project is seen as no different from a typical agent-contractor project, in which the agent dictates terms and the contractor follows them meekly. The agent is focused more on finding faults with the contractor and in penalizing him. Many government agencies do not feel that the onus of removing the barriers and to get the project successful lies as much on them as it does on the private party.
Poor performance in PPP projects has been attributed to many deficiencies with private parties also. There have been many instances in which the private agency has taken the project through very aggressive and unrealistic bidding, and then sought to change the contract terms using its influence with the key decision-maker. While this strategy of currying favors might have worked in a few cases, more often than not, the project has run aground with a plethora of litigation surrounding it. The other reason for poor results has been the private agency's lack of project delivery experience.
Nevertheless, it is in the interest of the country's future that PPP projects are made to work and deliver. It is critical that solutions are found to all these defects. Repeated bad experiences with PPP projects will eventually drive the private sector away, which the government can ill-afford now. Similarly, unethical practices by the private parties will also cause a generic mistrust among government agencies towards the PPP model.
Of late, there has been talk of the need for arbitrators and regulators for PPP projects. An arbitrator is expected to pronounce a fair and objective verdict in case the parties need to depart from or review the terms of the partnership. The arbitrator will also fix accountability for noncompliance with the terms. Similarly, a regulator will be required to decide whether the returns from a project can be qualified as fair and justify the investment made by the private party. The regulator will also value and protect the government's interest in the project.
While there is indeed a strong case to position both arbitrators and regulators for PPP projects, there is an equally strong case for involving competent project management experts for the task. Right from structuring the project, completing the preparatory groundwork, preparing bid documents, taking it to the market, evaluating and finalizing the bids, to project management tasks during and after implementation, the need for professional expertise among both public and private agencies is very high. It is time to prepare a cadre of project management experts whose expertise can be used to ensure successful delivery of PPP projects.
(Mr. Jayesh Ranjan is a member of the 1992 batch of the Indian Administrative Service (IAS) and managing director of Andhra Pradesh Industrial Infrastructure Corporation.)
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