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Saturday, October 31, 2009 |
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Putting the PPP process into perspective
:: News
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In order to place a PPP in perspective we’ll examine how government normally provides serviced office accommodation for its institutions.
Once the institution has identified its requirements it tasks the Department of Public Works (PWD) to procure the facility on its behalf. The PWD appoints a professional team to design a facility that meets its requirements. The Professional Quantity Surveyor (PQS) measures the design and produces a Bill of Quantities (BOQ) which is used by the competing construction companies to price the construction of the facility.
The PWD then appoints the contractor, usually based on the lowest price submitted for the construction of the facility. From here onwards the contractor usually engages with the Professional Team in the construction of the facility. On
completion of the facility the institution engages other private companies for the provision of services such as cleaning and security. These are known as Soft Facilities Management (or Soft FM). The PWD remains responsible for the upkeep of the physical building (or Hard FM) and it would appoint private companies to undertake this upkeep as required on its behalf.
The institution approaches the national treasury to have the project registered as a potential PPP. Once registered the institution appoints a team of transaction advisors who assist the institution in determining its requirements. These would include not only a description of the physicalbuilding but also the maintenance and services required to run it, as well as the funding for the entire facility.
The first task for the institution is to assess whether indeed their requirements can be best procured by means of a PPP or by traditional means. This exercise is called a Public Sector Comparator (PSC) and once again this is presented to national treasury who gives the project the green light. The next step is advertised for those parties interested in providing these services in what is called a Request for Qualification or RFQ. The respondents would group themselves into consortia comprising:
• Architects and engineers - to do the design.
• A contractor - to build.
• A financier - to fund the project.
• A facility manager - to maintain and operate the building.
• As well as multitude of other specialist advisors.
Usually the institution would pre-qualify two to four consortia to bid for the provision of the serviced accommodation. Only the pre-qualified consortia are invited to submit bids in terms of the institution’s Request for Proposals or RFP.
The RFP describes the institution’s requirements in what is called an output specification. The output specifications would give the number and sizes of offices, meeting rooms, kitchens cafeterias and specialised areas. The performance levels are required in the different facilities in terms of ambient temperatures, lighting levels, IT requirements and sound levels. The facility management requirements outline the required service levels in terms of security, catering,
cleaning, response times, routine maintenance and availability. It also indicates the concession period for which the private party would be responsible for providing the serviced accommodation (usually for a period of between 15 and 30 years) during which the institution (public party) pays a unitary charge (think of this as rent).
The private party gets the design and construct contractor to provide a fixed price (CAPEX) to design and build a facility to suit the requirements of the Institution as outlined in the output specification. The facility manager provides the private party with a price (usually annual) for the running and maintenance costs (OPEX) of the facility. The financiers provide the private party with a funding proposal to amortise the CAPEX over the concession period. The amortized funding and the OPEX would be used to calculate the Unitary Charge which is the commercial offering submitted for consideration by the institution.
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