The proposed sectors for PPP projects are: education, sports, healthcare, expressways, water treatment and waste management. Respondents suggested that IT and telecommunications, defence, convention/exhibition centers, transport (light rail, port, airports), prison and power may be potential sectors for PPP projects. Existing government facilities may also be contracted to the private sector using the PPP model.

MOF’s response: We are open to consider applying PPP is the other sectors such as those suggested in the feedback if PPP can yield value for money gains. Nonetheless, for a start, the Government will consider adopting the PPP model on a few projects first, such as on the Sports Hub, waste management and water treatment.

Other PPP models such as DBFT, BFO, DBOO, BOO, joint ventures and split concessions were suggested for consideration by the public sector, in addition to the Design-Build-Finance-Operate and Design-Build-Operate models. One respondent also thought that the PPP Handbook should promote a rigorous analysis of a range of PPP delivery options.

MOF’s response: The public sector is open to any other variations or new PPP models that may be proposed by the private sector.

Respondents generally agreed that risk should be allocated to party that is best able to manage it. In addition to the risks mentioned in the handbook, allocation of responsibilities for change in law/tax, site risks, technological changes and force majeure should also be considered.

MOF’s response: MOF agrees that optimal sharing of risks and responsibilities between the public and private sector can lead to efficiency and effectiveness gains. By sharing responsibilities optimally, Government and the private sector can put together their expertise to deliver the public service in the best value for money way. Additional suggestions of risks are noted. Allocation of responsibilities and risks such as changes in law/tax, site risks, technological changes and force majeure, will be dealt with explicitly in the PPP contractual agreement.

Most respondents thought that the GOCO model is more suitable for projects providing essential services, impact national security, or where the land or facility should be retained by government for public policy reasons. However, the COCO model allows for a greater level of risk transfer to the private provider and may be appropriate when the private sector revenue stream is mainly based on third part revenue.

All the respondents agreed that it is not necessary for the private provider to own both the land and facility to obtain private financing. It is sufficient for the provider to have legal right to use the land and building for the contract term.

MOF’s response: Whether the GOCO or COCO model is used will have to be determined on a case by case basis depending on the nature of the PPP project. While ownership of land and buildings could make a project bankable, the assured stream of government purchase of services on completion of a project could also make the PPP project bankable without ownership of the land and buildings. The key is working out the appropriate arrangement for securing the best value for money to the public sector and the users of the services.

Most respondents felt that compensation must depend on the causes of termination and the risk allocation. If the government voluntarily terminates the contract, the private company and financier should be no worse off. Should the private contractor default, government should not benefit from windfall gains by exercising its step-in rights. Lastly, the financial consequences should be shared between the public agency and the private provider if termination was due to force majeure.

MOF’s response: MOF notes this feedback and will prepare policy guidelines on compensation arrangements for PPP contracts.

Some respondents thought that the project team should include insurance and project management consultants.

MOF’s Response: The competencies required in the PPP project team as stated in the PPP handbook provides a general guide to structure and evaluate financial, legal and technical aspects of the PPP deal. Public agencies may bring in other advisory expertise, if needed, to structure and implement the PPP project.

Long procurement timescales, high bid costs, inflexible long-term contracts, inadequate explanations of project requirements and lack of proper risk allocation are cited by respondents as potential PPP pitfalls. Suggestions for avoiding these pitfalls include: effective project management, minimise specifications of project inputs as well as an early, robust assessment of validity of the PPP scheme and contract terms for each project.

MOF’s response: We agree. The need to manage these pitfalls and how to do so has thus been shared in the PPP Handbook. Nonetheless, we have revised the PPP handbook further to clarify on project management competencies needed for PPP implementation.

Respondents generally agreed with the handbook guidelines on the use of availability, performance and usage payments. Some suggested that direct incentives/penalties may be used for easily measured hard data performance parameters while indirect incentives/payments may be used for softer measures of performance parameters. Respondents also noted that the structure of the payment mechanism drives the risk allocation.

Some respondents suggested that the unitary charge should be varied via revenue sharing, refinancing or transfer of asset between the private provider and the public agency. Changes to the unitary charge may also be considered should there be unforeseen physical or economical conditions.

MOF’s response: The PPP Handbook includes general guidelines on structuring the payment mechanism. The actual form of unitary payments will vary for each PPP project, but these suggestions will be taken into account for future PPP projects.

The common suggestions for reducing tendering costs are:

MOF’s response: There cannot be a standardisation of the whole PPP contract because a lot depends on the nature of each project. However, wherever feasible, standardisation will be applied to the relevant sections.

Unless there are exceptional circumstances, the Singapore government will not refund bidding costs to unsuccessful bidders. The government is mindful of the need to keep down the cost of bidding and will employ various measures, eg, shortlisting the more promising bidders so that fewer bidders need to go through the whole process and take on the cost of making the full bid.

Most respondents felt that the pre-procurement briefing should include an accurate definition of project scope, outputs, timelines, indicative estimate of capital cost as well the roles of other stakeholders.

MOF’s response: MOF agrees that the service requirements should be stated clearly as far as possible at pre-procurement briefings and will encourage public agencies to provide sufficient information to help prepare the private sector.

Some respondents suggested that regular meetings for the private sector should be held to understand and clarify the technical and financial requirements of the PPP project. There was also a suggestion that the procurement process may be streamlined by postponing the amount due diligence required until preferred bidder is declared. It was commonly felt that the length of market feedback period required depends on the complexity of the contract.

A significant number of respondents are concerned about safeguarding intellectual property rights during the market feedback period.

MOF’s response: Typically there will be three types of information exchanges between the Government Procuring Entity(GPE) and the pre-qualified bidders. GPEs must clearly state in the ITT what these are and how each will be dealt with accordingly.

The first type of information exchange refers to pre-qualified bidders seeking clarification. Clarifications refer to queries raised by the bidders for which the bidders will want an answer from the GPEs. The GPE will allow at least 1 round of written clarification during this period before the tender closes. The GPE will release to all the bidders its written replies to all the clarification.

The second type of information exchange refers to suggestions. By suggestions, these refer to any ideas or proposals which the pre-qualified bidders may have, and which it wishes to make known to the GPE. Upon receiving the suggestions, the GPE will ensure that it will not disclose the suggestion. Nonetheless, the GPE is not required to reply to the suggestion. Nor is it obliged to accept the suggestion. If the suggestion is accepted, it will be included into the revised tender specifications.

The third type of information exchange refers to alternative proposals on how the GPE’s needs can be met. Such information is of commercial interest to the bidders. Bidders may wish to submit such alternative proposals to the prescribed tender specifications as part of their official response to the PPP tender, as a variant bid. Tenderers should note that the variant bid can only be considered if they submit a base bid in accordance with the specifications of the PPP tender.

Some respondents pointed out that insurance is the primary method of risk allocation and insurance consultants should be included in the PPP project team.

MOF’s response: MOF agrees that insurance advice may be a part of the PPP advisory competencies needed to structure and implement PPP projects.

Suggestions for other key issues to be addressed in a PPP contract in addition to those mentioned in the PPP Handbook include:

MOF’s response: MOF will take into account these areas and if need, formulate policy guidelines on the standardized treatment of these areas for PPP contracts.

Nonetheless, each such area will be tackled, based on the specific nature of the PPP project, in the PPP contract.

Besides the contract administration processes stated in the handbook, respondents felt that an independent reviewer should be appointed to monitor physical and contractual performance by the private provider. Respondents also noted that the contract administrator should be familiar with the agreed rights.

MOF’s response: MOF agrees that an independent reviewer may be appointed to conduct price reviews or benchmarking, if both the procuring agency and the private provider may find it helpful to conduct periodic independent performance reviews.

There were concerns that the tender will always be awarded to the lowest bidder. One respondent suggested that indicative price bids be used to evaluate the bidders’ experience, pricing philosophies and overall bid approaches. Price negotiation was also suggested as part of the procurement process.

MOF’s response: Design and quality, not only price, are important factors to consider when evaluating a tender. Given that PPP are longer term contracts of about 15 to 30 years, it is important for government to select the right partner that is able to not just deliver the facility but also sustain service delivery at an acceptable level in the long term.

It is a general rule which governs all tenders and bids for government projects that negotiations are not allowed. This rule shall apply to PPP tenders also. Otherwise it will undermine government’s policy on transparency and even-handedness.

The PPP procurement process has been designed to allow public agencies to gather private sector feedback in a transparent manner before calling for tenders. In particular, the Market Sounding and Market Feedback phases provide the opportunity for interested PPP partners to give their comments on the features of the PPP proposal before government agencies issue the final invitation to bid for the project.

Respondents felt that refinancing gains should either be co-shared with the government or should solely go to the private provider, since they have been factored into the best and final offer.

MOF’s response: The government is open to PPP projects planned with refinancing in mind. There is provision for the PPP partner and the public agencies to share the refinancing gains.

Some respondents wished to clarify MOF’s role in the PPP projects.

MOF’s response: There is a unit within MOF that creates awareness of PPP, handles PPP policy and provides guidance on PPP matters. In addition, the PPP advisory council meets regularly to review and discuss PPP policies. The council also oversees the progress of major PPP projects and facilitates resolution of inter-agency issues.

MOF is working closely with procurer-agencies for each of the upcoming PPP projects. For specific issues on each PPP project, MOF and the buying agency will jointly approach the relevant agencies to resolve inter-agency issues.

MOF will conduct PPP briefing sessions for public agencies. The objective is familiarize agencies with the salient features of PPPs. MOF will also provide more focused assistance for those agencies which may be embarking on PPPs in the near future.

Some respondents were interested to find out whether there are restrictions on the nationality of bidders.

MOF’s response: All interested parties can put in bids. The PPP providers will be selected through the tendering system which is open and transparent to all potential providers. The Government will select the PPP provider which can deliver the best value for money.

The role of small, medium enterprises(SMEs) in PPP projects was a source of concern.

MOF’s response: Because of the complexity and long term nature of PPP contracts, there are greater planning and administrative costs involved. More significant savings will accrue to the bigger projects. Hence, the Ministry of Finance has set the guideline that projects above $50 million be actively considered for suitability as PPPs. Nevertheless, some projects less than $50m can also be considered for PPP if the circumstances justify it.

For certain projects where there is commonality of core services, it will be sensible to combine the PPP contract in order to achieve economies of scale and other cost benefits. The key consideration is to find the best project scope and the procurement model to achieve the best value for money, and not to combine projects simply for the sake of increasing its scale.

SMEs can participate in the PPP consortiums as partners, contractors or subcontractors. In addition, SMEs can continue to contract directly with the government for projects below $50 million where PPP is generally not applicable.

Some respondents enquired on the process of personnel transfer in PPP projects.

MOF’s response: Any staff transition with be dealt with on a case by case basis in consultation with with the Public Service Division as per the practice in Best Sourcing exercises.