Saudi E-Gov PPP Framework

February 2008
Suhail Al-Almaee Director of Strategic Planning and Supporting Initiatives Saudi eGovernment Program (Yesser) salmaee@yesser.gov.sa

Agenda

E-GOV PPP FRAMEWORK WHY & HOW? USING THE FRAMEWORK BUILDING THE RELATIONSHIP

E-Gov &

E-Gov &

E-GOV PPP FRAMEWORK WHY & HOW?

PPP Definition
PPP is a contractual agreement (partnership) whereby a private partners performs part or all of government services or function. Such a partnership are characterized by sharing of investment, risk, responsibility and reward.

E-Gov &

The essentials of PPP agreements are: - Focus on the service to be provided, not the assets to be employed. - Shift of the risk and responsibility to a private provider.

PPP = investment + long-term provision of services

4

Rational

To establish a framework that will help government to achieve the best outcome of PPP, which is driven by increased

E-Gov &

need of efficiency and quality of E-Gov services delivered.

Secondly, the need for cost saving, access to advanced technologies and resources and minimizing the risk.

Framework Objectives
Developing a comprehensive framework to govern the use of public-private partnerships (PPP) for e-government in

the Kingdom of Saudi Arabia.

E-Gov &
In compliance with the Council of Ministers resolution No. 110 dated 5/4/1425.

Challenges
Globalization

E-Gov &

Consumer / Customer Expectations

Government

Technology Innovation

Limited Resources / Skills

New Formula
Globalization

+
+
Technology

Customers

E-Gov &

Resources / Skills

Pressure
on governments to change

E-Government + PPP

Government Innovation
8

Scope of Work Track

Yesser PPP Framework development Project
Major Project Stages

E-Gov &

Readiness assessment

PPP Policy framework

PPP Manual

PPP Templates

Gap analysis

Major Projects Components

Readiness assessment

E-Gov &

Conducting needed interviews Review relevant documents Draft a PPP readiness assessment

10

Scope of Assessment
A team of consultants collected information from a variety of sources. This Readiness Assessment is based upon the teams access to:

E-Gov &

Materials publicly available, including laws, regulations and examples of standard contracts; Interviews with selected Gov stakeholders, interviews for example included (MoF, SEC, E Gov Program, EDI) Interviews with selected private stakeholders, interviews included international and national companies. International best practices for PPP.
11

Major Projects components con.

PPP Policy framework

E-Gov &

Capture of international best practices KSA drivers Draft a PPP policy framework

12

Major Projects components con.

PPP Manual

E-Gov &

Module definition Input from PPP project and contract management experts Draft a PPP Manual Draft a PPP Quick reference Manual PPP lifecycle Card
13

Major Projects components con.

PPP Templates

E-Gov &

Develop templates/tools - Business Case - Feasibility assessments - Risk assessment - RFI - RFP - Standard contract - SLA - Public consultation

14

Major Projects components con.

Gap analysis Legal and institutional

E-Gov &

Report to MCIT/Yesser identifying gaps and recommendation on legal framework as they impact PPP Report to MCIT/Yesser/CITC identifying gaps and recommendation on institutional framework as they impact PPP
15

Next Steps
Consultation on PPP

E-Gov &

Public Consultation on the Framework Stakeholders workshop Revision of Policy, Manual, and Templates Communicate the Framework to stakeholders

16

Next Steps con.

Case studies & Manual supplements

E-Gov &

Develop and distribute additional materials and case studies based on PPP projects in KSA as part of regular updating of PPP Manual. (Ongoing role)
17

What's missing
Communication Plan
A national communication strategy should be put in place to ensure that local authority officials are aware of the potential benefits of PPP and of the main issues involved in implementing them. Also, the strategy should have a similar part for the private sector.

E-Gov &

Training Plan
Proper training for local authority staff is essential for PPP success. For example:
- Project feasibility and business case - Project management - Contract conditions and negotiation - Risk management - Contract management - Performance and SLA management

18

PPP vs. Traditional Procurement

PPP Traditional Procurement

PPP

Traditional Procurement Buying products / assets Payment based on specifications Shorter contracts for delivery of assets Private sector is contractor delivering a product
19

E-Gov &

Focus on services Performance-based payment Long duration (3-20 years) Bigger role (and risk) for private sector

Types of PPPs
Private Sector participation

E-Gov &
Service contracts (Pub $, Prv Op of discrete tasks) Operation & Maintenance (Outsourcing) Design, Build, Operate (Pub $, Prv DBO) Build, Operate, Transfer (Prv $ and BOT)

Increasing risk transfer to private sector

20

Relationship & Trust = PPP

R
C
Relationship Management Dominates

E-Gov &

Business Value

C
R

C
Complexity & Trust

Contractual Management Dominates

C = Contractual Management R = Relationship Management

} The Partnership
=
21

PPP for e-Government

PPP Models
Fee-based funding

E-Gov &

Shared cost savings Shared revenue

Full service delivery

22

PPP for e-Government

PPP Model Fee-based funding Advantages Encourages customercentric focus Disadvantages Customers will not accept new charges so agency owning service will

E-Gov &

Shared cost savings

Results in more efficient Gov operations

Cost hard to measure; requires BPR (not easy)

Shared revenue

No impact on existing ops; may result in higher compliance Shifting services to new org. encourages innovation & efficiency

May not produce more efficient Gov

Full service delivery

Loss of control / authority

23

PPP Drivers / Benefits

Why are governments using PPP?
Faster, more efficient delivery of services / information Access to private sector expertise, skills, ICT and innovation

E-Gov &

Enabling an agency to focus on its core business Enhancing organizational learning / skills within public sector Increasing service levels or scope of e-services Shifting risk from agency to private sector

Increased effectiveness of project management

Reduce costs and increase revenues
24

PPP Drivers / Benefits

Who benefits from using PPP?

To Government
Minimise capital investment and risk

To Private Sector
Unique business opportunities Income from government transactions

To Community
One-stop-shop of public services Views from citizens and customers

E-Gov &

Faster implementation

Tap private sector management and market expertise

Income from commercial services and advertisements

25

Current PPP Policies

Highlights
PPP are intended to become a best practice in e-government implementation in KSA.

E-Gov &

Private sector participation in E-Gov based on principle of shared expected revenue Feasibility study and public tender (if feasible) are required for any proposed E-Gov PPP PPP rules apply when agencies contract private sector entity to fund and implement a project
26

Roles & Responsibilities

Sponsor Agencies: MoF: Primary responsibility for their PPP projects * Oversight of budgets, pricing and revenues of all projects * Manages National e-Government Fund * Agencies must coordinate with MoF on financing PPP

E-Gov &

General Audit Bureau: Oversight powers that apply to PPP Yesser: Facilitator of e-government (and e-services) in KSA

27

Best Practices & Lessons Learned

Global Best Practices
Create a single, dedicated entity responsible for PPP

E-Gov &

Establish clear mechanisms, rules and review criteria

Make PPP decision-making is streamlined, fair, open and transparent, enabling faster go / no-go decisions Free PPP from overly bureaucratic approval processes
28

Best Practices & Lessons Learned

Global Lessons Learned
Coordination with multiple agencies complicates (or obstruct) use of PPP

E-Gov &

Too much bureaucracy and too many approvals can create major problems for sponsor agencies (and projects)

Lack of clear process leaves sponsor agencies unsure when to consult and creates inconsistencies in what different agencies do (or dont do)
29

Best Practices & Lessons Learned

Global Best Practices Users Stakeholder buy-in is key to PPP success Service owners Identity owners Employees Political officials Affected staff

E-Gov &

Identify, understand and consult your stakeholders Consult early, consult often Make stakeholders genuine participants in PPP process

Financing institutions
Other departments Other organizations
30

New Stakeholder Formula

Transparency

E-Gov &

Buy-in

Willingness to push, mandate, create incentives

PPP success
31

Readiness Checklist

E-Gov &

32

E-Gov &

Coffee Break

33

E-Gov &

USING THE FRAMEWORK BUILDING THE RELATIONSHIP

34

PPP Lifecycle

E-Gov &

35

E-Gov &

36

Phase I: PPP Inception

E-Gov &

Develop a business case

Feasibility Study + Risk Assessment

comparing costs of PPP vs. traditional procurement

37

Phase I: PPP Analysis

Due Diligence
Examine new risks created by private sector delivering services Evaluate business opportunity and market to attract viable bidders

Project Design
Be service-oriented from start PPP must enable private sector to earn a profit

E-Gov &

Continuing use of market research

Clear, detailed description of services being delivered

38

Phase II : PPP Procurement

Make RFP outcomes-based
Business case ensures feasibility and identifies procurement strategy Pre-RFP consultants with private sector

E-Gov &

39

PPP Selection
Clear selection criteria
Bidders capacity to execute a project Minimum thresholds eliminate bids that underestimate costs

E-Gov &

40

Phase III :PPP Contract Management

Well-designed contracts + Active contract management = PPP success + Relationship management

E-Gov &

Service Level Agreements

Well-defined deliverables Performance benchmarks

Contract transparency Documentation method

41

Phase IV : PPP Project Management

Project Execution Flexibility

E-Gov &

No trust

No Users Communications

No PPP

Political and Admin Support Dispute resolution

42

Phase IV : PPP Project Management

Performance & Knowledge Management Central knowledge management

E-Gov &

Sponsor knowledge management

Project-level monitoring

High performance standards

Clear performance measurements 43

Phase IV : PPP Project Management

Relationship Management

E-Gov &

PPP

= =

Long-term partnership Long-term investment Contractor

Partner

Margins count
44

Phase IV :PPP Auditing & Oversight

Auditing for regulatory and financial compliance

E-Gov &

Independent external auditors

Quarterly review by PPP governing body

45

PPP Closure
#1 Issue: Continuity (and transition) of service delivery

E-Gov &

Options at end of PPP contract period:

Extend PPP with same partner Agency takes over service delivery Award PPP to new partner

Collect and publish PPP lessons learned

46

Priority Agenda
PPP Governance: Central PPP coordinator Coordination process Conflicts of interest Business case requirements Feasibility study requirements Risk assessment requirements

E-Gov &

PPP Analysis:

PPP Selection:
Management:

Selection criteria
Stakeholder consultations Contract management

47

Central PPP Authority

Establish central PPP Unit with responsibility for:
Maintaining, as needed, specific regulations and standardized methods for PPP procurement procedures, model contracts and documentation.

E-Gov &

Proposing new PPP policies with regard to financial issues for PPP. Publishing guidelines to resolve any obstacles (e.g., in tax, service pricing, use of special purpose companies and joint ventures) to use of PPP. Facilitating the setting of priority of PPP projects across government; and encouraging use of PPP as standard option in e-government.
48

Conflicts of Interest
Standard rule against conflicts of interest: Any person or entity that has a potential conflict of interest in

E-Gov &

performing their official duties during the PPP lifecycle for example due to their financial interests or personal relationships must report this to appropriate authorities prior to the exercise of that person or entitys duty. In general, persons or entities with a potential conflict of interest with respect to a PPP project shall remove themselves from the decision-making process for that PPP.
49

Use of Business Cases

Business plan (and tender docs) should clearly describe:
Services being delivered

Business, technical and procurement options

Strategic alignment with the business plan of sponsor agency

E-Gov &

Operational impact on sponsor agency and delivery of public services Stakeholders and their business requirements Pricing / revenue sharing for services Resources needed from government partner (including human resources) Feasibility, risk assessment and risk management Implementation strategy / timetable Contract management processes and tools
50

Risk Assessment
Areas of risk to consider:
Reduced demand for service or failure to realize projected increases Revenue and cash flows

E-Gov &

Operational risks (e.g., failures in deployment or degraded service quality) Infrastructure costs Political / Regulatory risks Technology (e.g., failure of existing ICT or inappropriate ICT choice) Financial strength of private sector partner(s) Inflation / foreign exchange fluctuations New risks are introduced because private partners will deliver services
51

PPP Selection
PPP selection criteria might include:
Value-for-money (feasibility) Appropriateness of PPP for objectives and needs of E-Gov project Cost

E-Gov &

Ability to effectively implement and manage a project

Viability of revenue sources and forecasts Availability of skills needed

Time to implement
Financial and legal risks in partnering with private sector
52

PPP Contracts
Areas addressed in a standard PPP contract:
Project objectives, quantitative outcomes, performance indicators Payment mechanism (based on availability, demand and quality) Sharing of additional yields and excessive profit

E-Gov &

Consequences of contract breach by either party Restriction of concessionaire's responsibility Risk sharing Change Mechanism Agencys right to withdraw from project at its discretion with fair compensation to private partner What happens with assets after PPP contract ends Settlement of disputes and conflicts
53

Relationship Risk
Relationship risks that exist when external resources are chosen over internal resources. These risks include

Expectations on service delivery Vendor responsiveness to the need for improvements Vendor failure to deliver on time Impact on staffjob satisfaction, morale, workload

E-Gov &

54

Why Fails
-Short term focus -Failure to understand the project motivations -Poor communication -Failure to recognize risk -Failure to identify risk until contract signed -Inadequate or none existence of SLA (service level agreement) -Reward contract at low price approach -No performance measures

E-Gov &

55

After Signing the Contract

-The people who come to know us in the sales cycle go away once the

contract is signed.
-How can vendors be flexible during negotiation and not in delivery?

E-Gov &

-I expected detail processes for implementation then I got (How do you want to do this?) -Insufficient effort during the discovery phase, it will come out in the delivery phase. -Do the vendor have a track record with others. -There was no transition plan, I want to see tools that would facilitate the transition.
56

Pre-contract
-Defined the need:
. Focus on results: Not procedures or processes . Be accurate: Do not guess what is to be expected . Be comprehensive: Cover all issues and express all expectation . Be detailed: Cover all desired outcome . Be specific: Illustrate in the needed outcome . Be measurable: include performance requirements -Develop the means and methods to meet the needs: . Sitting the expectations for both parties . Know the: - What - When - Where - How of the contract.

E-Gov &

57

Make it Successful Always think

E-Gov &

Win-Win
58

Thanks

E-Gov &

for quality public services

59