Gov’t. establishes formal policy for public private partnerships

Gov’t. establishes formal policy for public private partnerships
Deputy Prime and Minister of Finance, Peter Turnquest.

The Government has established a formal policy for public-private partnerships (PPP) that sets out clear definitions and terms to govern the process of identifying, screening, procuring and managing PPPs, including how to treat unsolicited proposals.

Deputy Prime Minister Peter Turnquest said in the past, the term PPP has been used in broad, often metaphorical terms to account for any number of projects, including those categorized as joint ventures, management contracts, and even simple vendor-financed transactions that represented essentially short-term loans to the government.

He noted, however, that with the new policy, the government specifically defines a PPP as a relationship between the government and a private sector entity or consortium designed to introduce private sector resources and expertise into public infrastructure projects.

The intended use of a PPP is to implement priority investment and infrastructure projects that are aligned with the government’s development objectives, where doing so is expected to provide the best value for scarce resources.

Turnquest said the government is looking at every possible avenue to limit its borrowing and constrain its debt while meeting its financial obligations.

“The reality is meeting The Bahamas’ infrastructure needs is beyond the fiscal capacity of the government alone, given the geographic dispersion of the islands, coupled with low population densities of the Family Islands and higher than average infrastructure costs,” Turnquest said.

“These factors create particular challenges with regard to policy, management and maintenance of public infrastructure.

“To address these challenges, the government recognises the private sector has financial and technical resources that can be mobilised to help provide high-quality, responsive, resilient, and sustainable public assets and services in a way that achieves value for money for the government and public users.”

Turnquest said while it is not new for the government to use PPPs to advance its policy objectives, the government has taken responsible action to develop a formal policy and move away from the ad hoc approval of previous governments.

The PPP Policy will inject a new level of transparency and accountability to the regulation of PPP projects, creating a standard set of objectives and criteria for the identification and screening of projects, for the procurement of PPP partners and the management of PPP projects. In a climate of fiscal restraint, a formal policy also ensures that the fiscal impact of all PPPs is not only well understood, but in line with the Government’s legal obligations to fiscal responsibility.

The new PPP Policy provides guidelines for reviewing unsolicited PPP proposals from the private sector; however, its primary focus is public investments that have been identified and prioritized by the government in order to close critical infrastructure gaps that stifle medium and long-term growth and social development. The policy creates flexibility in structuring PPPs by allowing for a variety of contract types.

“Partnerships of this nature undertaken by the government must go through a rigorous accountability process because we are talking about using public money on major infrastructural projects that have profit incentives built in for private sector partners,” he said.

“This is not the private sector where you can make snap decisions and do what you want when you want because it is your own private money. These are public investment projects and there is no shortcutting the accountability process. It must have transparency and it must be open and fair, and it must be fiscally responsible. That is why a policy is necessary and that is why our policy establishes these as guiding principles along with value for money, environmental and social sustainability, partnership and inclusiveness.

“We have created a streamlined process that is fair and transparent with essentially only three stages: Project Identification and Screening; Business Case Analysis and PPP Procurement. The oversight and management structure has four reasonable tiers: Sector level/project specific management teams; overall PPP Operational Unit at the MOF and oversight bodies responsible for all approvals in the PPP Steering Committee and Cabinet.

“This creates the needed checks and balances for responsibly managing public money and protects the return on investment for the Bahamian people,” he said.

“It important to note as well that although the policy sets guidelines for the ideal size of projects and the nature of same, the government will retain its right to exercise flexibility on project types and project sizes that it will consider and make exceptions when warranted.

“The primary ambition is to engage the private sector in a way that makes optimal use of public resources toward public sector goals.

“I emphasize the point because I want to encourage all Bahamians who may have a project idea that may not fit into the prescribed scope to still come forward with their ideas and plans. If they fit into the guiding principles of the PPP framework and the project makes sense for the Bahamian people, the government will be prepared to give consideration to it,” he concluded.