Public Consultation on Draft Public Private Partnership (PPP) Handbook

The Ministry of Finance is launching a public consultation exercise to seek comments and feedback on a draft Public Private Partnership (PPP) Handbook. The public consultation will take place from 5 August to 15 September 2004.

2 PPP is a new approach that Government is adopting to increase private sector participation in the delivery of public services. With PPP, the public sector will focus on acquiring services on the most cost-effective basis, rather than directly owning and operating physical infrastructure and assets.

Background

3 As part of the public sector's Best Sourcing efforts, the Ministry of Finance is introducing PPP as a Best Sourcing model which public agencies may adopt to work with the private sector in delivering some services.

4 Best Sourcing encourages public agencies to engage private sector providers in delivering non-core government services if it is more efficient to do so. Public agencies can engage the private sector in many ways, such as contracting for manpower, service outsourcing or Business Process Outsourcing. Public Private Partnership (PPP) is another form of Best Sourcing that can be used to work with private sector to deliver services, particularly services that require the development of new physical assets.

What is PPP?

5 PPP refers to long-term partnering relationships between the public and private sectors to deliver services. PPP brings together the public and private sectors' expertise, resources and innovation to meet the needs of the public more effectively and efficiently.

6 Conventionally, the public sector has only engaged the private sector to construct facilities or supply equipment. Public agencies will then own and operate the facilities or equipment to deliver services. For example, the Public Utilities Board (PUB) usually engages private companies to build water treatment plants. Upon completion, PUB will own and operate the water treatment plants to provide water to the public.

7 With PPP, the public sector will focus on acquiring services at the most cost-effective basis, rather than owning and operating assets. For instance, the first desalination plant in Singapore will be developed through a Public-Private Partnership between the Public Utilities Board (PUB) and SingSpring Pte Ltd (a wholly owned subsidiary of Hyflux Ltd). Under the PPP arrangement, SingSpring will design, construct, finance, own and operate the desalination plant to supply water to the Public Utilities Board for 20 years. Instead of owning and operating the desalination plant, PUB will only be purchasing desalinated water from the private provider.

Why PPP?

8 PPP marks an exciting improvement to the way the government delivers public services. Many other countries, including the United Kingdom, Ireland, Australia, Hong Kong and Canada, have used PPP to develop public sector facilities such as schools, student hostels, low-cost public housing, government office buildings, water and sewerage treatment works. In the UK alone, 617 PPP projects have been signed with a capital value of over £56bn (S$176bn)¹.

9 The overseas experience with PPP has generally been positive. Although not every PPP project has been successful, experiences from governments abroad have shown that if structured properly, PPP can give rise to mutually beneficial outcomes for the public sector, the private sector and the users of the services.

10 In particular, public agencies can deliver services with better value for money by:

• Tapping on the private sector's flexibility to introduce innovation.

• Achieving optimal whole-lifecycle costing by outsourcing design, build, maintain and operate to the same private company (or consortium), which will optimise the total project cost.

• Achieving better asset utilisation by sharing government assets/facilities with third-party users.

• Sharing responsibilities between the public and private sector, such that each party is responsible for activities that it can best manage.

11 PPP also offers more business opportunities to the private sector. The private sector can look forward to providing a wider range of services, which were traditionally provided by the public sector, over a longer contract period of up to 30 years.

12 By bringing together the expertise of the public and private sectors, PPP will help the Government meet the needs of the public effectively and efficiently. The Government is also committed to ensuring that public interests are protected when the private sector is engaged to deliver services. In particular, the Government will ensure that:

• The services are delivered at the best value for money;

• There is minimal disruption to service delivery;

• Public health and safety are not compromised; and

• Confidentiality of personal information is observed.

Draft PPP Handbook for consultation

13 The draft PPP Handbook describes (i) the PPP approach, (ii) the roles of the public and private sectors in a PPP project and (iii) the government procurement procedures for PPP projects. The PPP Handbook will serve as a guide for private sector providers and public sector agencies, to help all parties understand how to structure and manage PPP projects successfully.

14 Members of the public, especially existing or potential service providers to public sector agencies, are invited to contribute comments on the adoption of the PPP approach and the procurement process for PPP projects as outlined in the draft PPP Handbook. The feedback will help to improve the way the public sector works with the private sector in future government projects.

15 The consultation paper, draft PPP Handbook and accompanying documents will be available at MOF's website, from 5 August 2004. Respondents may send their com

MINISTRY OF FINANCE