TITLE PAGE: Build the capacity of the new PPP unit and make it fully operational with effective

service
delivery in one year.

● Names of Presenters : Ibraheem Sheerah an Samson Atsbha

● Organization/Agency: USAID
● Country: Ethiopian Case

WHY THIS ACTION PLAN?

● Relevant Background
The Ethiopian government has established new PPP law and soon will be ratified. Following this,
a new PPP unit is under construction and staff is assigns including a new director. The unit is
established under the Ministry of Finance and Economic cooperation.

● Explanation of Problem:
The Ethiopian government has ambitious plan to bring the people into middle income status by
2030, Following that, the government has been implementing various mega projects and
complex in nature. Previous projects have been done traditionally but now in view of sustaining
the projects and reduce the financial burden and minimize the risk, the government decided to
work through a PPP model through professionals by having a specialized unit.

● Some other problems:

• Poor system for identification of PPP’s
• Ineffective feasibility studies
• Lack of business plans for projects
• Poor adherence to, or failure to comply with, Procurement Law
• Lack of understanding of PPP Models and their benefits
• Lack of Capacity & human resource in Government and private sector
• Lack of, or ineffectual guidance and bidding documentation
• Poor contractual documentation and no standard documents upon which to base
contract documents
• Poor, or ineffective monitoring of projects during both procurement and
implementation
• Poor enforcement of contractual, legal and regulatory obligations
• Lack of stakeholder involvement

● Way forward:
The PPP Unit is envisaged as a service organization to coordinate, promote, facilitate and assist
PPP projects throughout Ethiopia. While there are precedents for PPP developing without the
help of a PPP Unit, it is understood that a coordinating agency that can not only provide
technical help but policy development is needed.
The PPP Unit is expected to function as follows:

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 1) Take a lead role in facilitating Ethiopia's program to promote private sector as a major
provider of infrastructure services. Their role would include coordinating and liaising
with donor initiatives to develop the cross-sector framework
2) Develop and distribute guidelines
3) Develop a priority list of potential projects for referral to the government for selection
as candidates PPP,
4) Promote infrastructure investments worldwide to both domestic and international
investors through promotion materials and overseas mad shows.
5) Promote projects that will make effective use of PPP. Work closely with implementing
agencies to promote and facilitate agreements providing, where necessary, incentives
and financing
6) Provide assistance and oversight to formulate government policy, support and provide
incentives to unbundled activities and projects that can be made attractive to Private
Sector actors.
7) Facilitate information dissemination and dialogue with potential investors and
financiers,
8) Provide a one-stop shop for investor relations, incentives, government risk analysis and
financial policy.

GOALS AND INDICATORS

Action Plan Goals KPI (Indicators) Target

Established legal and regulatory
framework
Put in place the PPP unit
structure with appropriate
staffing
 Ratification of the PPP By the end of the year
law by MP
 Regulation formulated
out of the PPP law
 PPP office established After six months
under the ministry of 50 headcounts
finance.
 #of professionals hired
to run the unit

# guidelines and procedures 10

Define roles and responsibilities produced
of the government counterparts
directly working with the PPP
unit.
Conduct capacity building and # of Workshops 5
awareness raising workshops # of Participants 20
Soliciting finance for full scale #commitments from the 10
operation government and donor
community

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WHAT WE EXPECT TO ACHIEVE?

● Our Goals for Year 1 are to accomplish:

o Ratification of the PPP law and come out with regulation
o Staffing complete
o Resume operation of the new PPP unit
o Conduct awareness raising workshop for the line ministries
● Then, we will be on track to achieve other in subsequent years
● The expected roles of the PPP unit
o Advice on policy and programs
o Project development and evaluation
o Marketing/promotion of projects
o Ensuring uniformity of policy standards,
o Quality control, standardization
o Technical assistance to government agencies
o Financial support for project
o Knowledge transfer, training, resource material
o Providing support in the procurement process

PARTNERS AND STAKEHOLDERS

Stakeholder Stakeholder Type Needs, Concerns Desired Role Engagement

or Perceptions (what is needed Strategy (Tailored
(stakeholder from them) for each unique
perspective) stakeholder)
Government The unit to Support Meetings and
sector establish a robust One-to-One
Government line procurement set of policies and Sessions
ministries section procedures for
PPP

Local and To be informed Participation and Conferences,

Private sector international and updated on share ideas and summits, social
the new concern media
developments in
PPP and the
legislations
related
Development To be informed Participation and Conferences,
Donor community partner and updated on share ideas and summits, social
the new concern media
developments in
PPP and the
legislations
related

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ORGANIZATIONAL AND IMPLEMENTATION ENVIRONMENT ASSESSMENT
STRENGTH:
 Political will (reflected in strategic policy
documents and plans, main legislation and
involvement of technical staff from ministries);
 Openness of the decision makers to revise
regulations and apply one consistent set of
rules for operation, monitoring and control of
both public and private providers;
 Achievement of more rapid infrastructure
projects;
 A reduction in overall of the project costs,
improving the quality of public services;
 Improving public sector management through
exposure to the rigors of the competitive
market services;
 Achieving technical and operational
parameters applied throughout Ethiopia;
 All partners involved in relations of Public-
Private Partnerships benefit of a clear and long-
term regulatory framework.
Strategy to leverage/maximize: Meet
expectations of stakeholders
OPPORTUNITY:
 Rapid economic growth
 There will be ownership transfer of public
institutions to local authorities, juridical and
financial autonomy of some providers allowing
greater freedom for local authorities to pursue
and put in place PPPs for their institutions;
 Different models of PPP are already
operational, some of them successful
 Excess infrastructure inherited from the former
organization of the public sector which could
be redirected to PPP projects;
 Positive effects in labor skills (especially in
construction services, technology).
Strategy to leverage/maximize: Meet
expectations of stakeholders and cease these
opportunities
WEAKNESS:
 Limited technical knowhow and professional
staff
 Reduced level of investment of local authorities
in the existing infrastructure for public utilities
that could be also operated by private
providers, complementing with technology
investment;
 Limited modern management and quality
control tools used in the public utilities;
 Loose and unclear regulation and control of
private providers (especially those providing
public services);
 Trend of migration of work force from the
public sector and lack of specialized and high
qualified staff inside the country;
 The process of legislative revision for the PPP
system in Ethiopia is actually still ongoing and it
is not completed yet.
Strategy to mitigate/overcome: Tailor made
capacity building and encourage investments
THREAT:
 Bureaucracy
 Mentality: more information, transparency,
active involvement of responsible technical staff
is needed;
 Political stability: transferring the
implementation procedures to the technical
level staff, after political agreement/consensus
being reached providing the PPP program with
higher degree of credibility and transparency
with potential investors/operators;
 Limited experience in working with PPPs
concepts and transactions: this can be
overcome by information and documentation,
collaboration with other sectors involved
(central authorities like MoE, MoF, international
donors and institutions etc);
 Utilization of public resources for the benefit of
the private operator may be politically
controversial. This can be overcome with clear,
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 correct and stable bidding and contractual
arrangements over the medium and long term;
 Uncontrolled development of the private sector
could undermine public confidence in PPPs. This
can be addressed by applying strict but correct
integrated regulations for both public and
private providers, controlling the volume of
public funds volume contracted by private
providers, and ensuring that public funds are
tied to contracted performance targets for
volume and quality of services.

PPP project must meet the following pre-conditions:

 Professionalism and correct procedure in PPP project preparation: The procedure for PPP
preparation is extraordinarily demanding with regard to professionalism and experience of the
employer. It is essential that PPP Projects are prepared and implemented by top experts,
financiers and lawyers. A highly experienced adviser can contribute significantly. A key issue is
the provision of an adequate project team, project resources and above all, a highly competent
team leader experienced in implementing similar projects. The development of an appropriate
governance structure which permits the efficient adoption of important decisions is also very
important.
 Dialogue with the private sector before the start of the process: There is no point expending
valuable public resources on the preparation of a PPP project that will not attract any investors,
or for which no bids will be submitted. The best way to avoid such a situation is the preliminary
consultation with representatives of the private sector with regard to the economic feasibility
and attractiveness of the planned project. In addition, potential partners may propose
innovations reducing total costs and improving the efficiency of the project. It is important that
these consultations are done fairly and openly and in a way that offers no particular advantage
to any bidder, prior to the commencement of the procurement process. Projects with an
apparent misbalance between profits and benefits, whether for the Country or private sector,
often reappear with problems and create situations that bring no benefit to anybody.
 Transparency during the whole process: Transparency in the award of PPP projects is an
important factor for their success. Transparency, openness and fairness during the whole
process of PPP preparation are important, because they minimise the possibility of corruption.
Thus they help to ensure the best possible conditions in the ongoing competitions for the
interests of taxpayers, as well as increasing the rivalry between bidders. Fair competition is in
the interest of all serious investors. They will not want to be involved in a process if the
objectiveness of it is in doubt. On the contrary, they are more likely to believe that they have no
chance of winning if they think that the competition may be influenced by corrupt practices.
Involvement in the bidding phase means considerable financial costs therefore if there is any
sense of a lack of transparency they are likely not to bid in the first place.
Other countries’ experience in PPP projects shows that a non-competitive method of
procurement is one of the most common reason for PPP failure since decisions like that are
often challenged by national audit bodies and/or by the Courts.
Although the openness and transparency principles are primary, it is equally important not to
use them as an apology for the undue delay of procurement procedure. Both investors and
interested parties will be willing to participate in fair and objective procurement procedure.

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 They will not want to be involved in a process lasting longer than is needed according to the law.
Competition conditions should be expressed in comprehensible language and clarity of the
process is essential.
In addition to the effort to make the procurement procedure as simple as possible, the
employer must adequately take into consideration the consequences of his own action (or no
action) and its impact on the interested parties with regard to their costs and resources.
Interested parties have limited resources and if there is undue cost or delay risk, they will be
reluctant to participate in the competition.
 Thoroughly prepared PPP contracts: The most complicated phase of PPP preparation is the
thorough preparation of base line data and the contracts themselves. Contracts must include in
detail all common PPP characteristics in order for them to be fundable. It is inevitable that the
preparation of PPP contracts will be by renowned lawyers experienced in PPP preparation. The
public sector must have the right to withdraw out of the contract anytime and upon its own
discretion. The calculation of fair compensation for such a withdrawal must be set out precisely
in the contract.
Examples of some important provisions in the concession contracts:
o Definition of objectives, their quantification and performance indicators.
o Payment Mechanism with regard to project payments (according to availability, demand
and quality).
o Sharing of additional yields and excessive profit.
o Consequences of contract breach by either party.
o Restriction of concessionaire’s responsibility.
o Right of the funding banks to enter the project.
o Risk sharing.
o Change Mechanism
o Public administration ‘s right to withdraw from the project upon its own discretion and
fair compensation for the concessionaire in such cases.
o What happens with the infrastructure after the concession contract termination?
o Settlement of disputes and conflicts.
 Monitoring during the whole lifetime: A PPP project is not finished by handing over the
infrastructure into operation. The phase when regular payments for the services are made,
requires the careful management of the agreed criteria on the part of the procuring public
administration entity. Any failure to observe the relevant indicators must result in significant
reduction in regular payments to private partner. The infrastructure must be adequately
maintained and after the lifetime of the concession handed over in a fair condition. Such project
monitoring naturally requires adequate public administration capacities. Monitoring has to be
performed in a way that enables the timely anticipation of difficulties and allows time for taking
measures to prevent them. Consistent monitoring should ensure prompt measures for
managing the potential threat of the private partner’s failure.

WORK PLAN IMPLEMENTATION

Action (1): Operationalize the PPP Unit

• Concentrates expertise in one center

• Acts as a central repository of standard documentation, guidance, bid documents etc.;
• Able to provide detailed procedures for identifying, evaluating and procuring projects;

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 • Acts as a resource and advice center for Central Government, line departments and sub
national agencies;
• Able to provide continuous improvement and to feed in ‘lessons learned’ to next
projects;
• Should initially be a small unit of experts trained in legal, technical and financial
requirements of PPP’s, trained and backed by international experts

Action (2): Provision of Training to PPP Unit and others involved in PPP’s

• Concentrate training initially on members of the PPP Unit

• Training on PPP Models, project identification, feasibility studies, building a business
case, contractor due diligence, procurement, drafting and negotiating documentation,
risk apportionment, financial modelling of projects and effective monitoring;
• Training to international standards by international experts;
• Develop capacity outside the PPP Unit:
o Private sector potential bidders
o Line Departments and Sub National Agencies
o Private Sector consultants
o Funders
• Provide continuous web based training and advice
• Use Pilot Projects for training and development of documentation: start small , with
time and develop carefully
• Training the Trainers

Action (3): Develop Standard Guidance Documentation and Contracts

• Such documents facilitate training of all sectors;

• Will produce substantial savings in time and money during procurement;
• Gives a benchmark for proper procurement and implementation of projects;
• Permits documentation of lessons learned for use in future projects
• Enables less experienced parties to better understand the process and quickens capacity
building;
• Limits or removes the potential for inadequately drafted contracts which lead to
uncertainty, disputes and loss of time and money;
• Allows a consistency of approach and pricing across a range of similar projects;
• Base on suitable documentation from other countries and organizations and use
international advice.

Action (4): Establish a ‘Project Pipeline’ and Pilot Projects

• A pipeline enables the private sector to understand the Governments needs for the
future and to grow and plan to meet those needs
• Should only include projects that are needed as a priority, achievable, feasible, with a
good business case, attractive to the market, bankable, value for money and allowed for
in the Government budget;
• Should be stable and not subject to change to enable market confidence in Mongolia to
be built up;

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 • Should be advertised widely in Mongolian and an international language: consider use
of Government Procurement Website giving full details of the required projects;
• Consider initially Pilot Projects for each sector to build capacity and documentation

Action (5): Monitoring and review of projects

• Is there a clearly identified need for the project?

• Is PPP the best procurement route to take to deliver the best value for money?
• Has proper due diligence been carried out on the Contractor to ensure that they can
comply with their contractual obligations?
• Is the cost of the project worth the benefit likely to be received?
• Does the business case work?
o Strategic Case
o Economic Case
o Financial Case
o Commercial Case
o Health and Environmental Impact assessment
• Carry out regular monitoring of the progress of the project: establish a line of
communication for stakeholder queries and complaints

Action (6): Ensure adherence to procurement procedures and proper audit trails

• Ensure procurement law enforced

• Ensure use of standard bid and contractual documentation provided by PPP Unit
• Monitoring or ‘spot checks’ of projects during the procurement process
• Ensure open procurement and public awareness of award criteria when appointing the
winning bidder
• Ensure that a full audit trail of decisions made during procurement is kept and copies of
contract documentation is available for review
• Establish a system for dealing competitively with unsolicited proposals

Action (7): Regulatory and Governance Issues

• Carry out review of Regulatory bodies and ensure that there is clarity of duties and
powers;
• Ensure that the apportionment of duties and powers is made public to enable bidders
and others to understand who they need to deal with;
• Ensure effective enforcement of regulatory powers by regulatory bodies
• Review tariff system to encourage market participation in public sector projects

Action (8): De-Centralize Fiscal Control

• Whilst procurement should, at least initially whilst capacity is being built up, remain
under central control of the PPP Unit, Line Departments and sub national agencies need
to be able to pay for projects in their sector or region
• Lack of finance often prevents this

Action (9): Ensure Donor Agencies and Government Agencies coordination

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 • Donor Agencies need to agree their respective roles and responsibilities in assisting the
Government in its progress towards a project procurement and implementation system
which is open, fair and transparent, encourages the development of the private sector
in Mongolia and attracts foreign investment into the country

Action Plan Title: Activate the Ethiopian’s PPP unit

Action Title Responsible Concise details of the Resources needed to
Part/Leader task and timeframe complete task
The operationalize of a PPP unit Head Details are shown Consultants
PPP Unit above
3 months
Provision of adequate PPP Unit Head Details are shown Consultants
training for PPP Unit above
and others 3 months
Drafting of Standard Consultants Details are shown Consultants
Guidance, Bid and above
Contractual 3 months
Documentation
Establishing a system Consultants Details are shown Consultants
for a ‘Project Pipeline’ above
3 months
Establishing system for Consultants Details are shown Consultants
the proper review of above
Projects 3 months
Ensure Adherence to PPP unit Auditing Details are shown Consultants
agreed procurement Function above
systems and the 3 months
establishment of audit
trails for projects
Deal with Regulatory Legal function in the Details are shown Consultants
and Governance Issues PPP unit above
3 months
Decentralize Fiscal PPP unit Details are shown Consultants
Control over above
procurements 3 months
Ensure independence, PPP unit Details are shown Consultants
fairness and openness above
of Judiciary 3 months
Ensure Donor Agencies PPP unit Details are shown Consultants
and Government above
Agency Coordination 3 months

LONG TERM GOALS AND CONCLUDING REMARKS

● In conclusion, this action plan is designed to achieve the following benefits fully:

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 • Guaranteed quality of services (provided the public sector specifies properly in the
beginning!)
• Utilizes private sector skills and innovation for public sector benefit
• Utilizes private funds for the public good
• Currently often “off balance sheet” treatment
• Encourages third party income generation
• On time and on budget projects increased dramatically
• Stimulates growth of private sector industry
• Enhances stakeholder involvement
• Significant transfer of risk to the private sector
• Improves value for money
• Responsibility for construction and maintenance passes to the private sector but the
public sector remains in control of the level of services required under the project

QUESTIONS?

Thank you…..

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