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In the 18th century, muskets were produced by skilled craftsmen, one piece at a time. Each component was individually forged, filed, and worked—like a piece of art—until they could all be put together into a single weapon.
Today, the limitations of this approach are apparent. The cost and time required to produce each musket were high, and replacement parts had to be made by hand. This method was replaced by production with interchangeable parts in the early 19th century, a process advanced by Eli Whitney, an inventor who produced arms for the U.S. government.
What, you may wonder, does this have to do with public-private partnerships (PPPs) and infrastructure?
As it turns out, a lot.
. Like the muskets of yore, each PPP is unique, time-consuming, and costly.
I am not suggesting that various countries, sectors, populations, and projects are similar enough to mass produce PPPs. But there is significant scope for countries to use more standard ways of initial decision-making around their infrastructure programs. And the more PPP processes can be standardized along best practices, the more quickly they can be structured and implemented, with better results.
Multilateral development banks (MDBs) are now working more closely together than ever before to introduce greater standardization at many levels, for example, with definitions, metrics, standards, and features of a sound enabling environment. Risk management principles and assessment tools can also be standardized. Universal approaches to social and environmental standards are another good example.
The benefits of MDBs using standard approaches are becoming increasingly apparent. Here are a few examples:
Sample legal materials are available to address common regulatory challenges facing PPP practitioners. The Public-Private Partnership Legal Resource Center (PPPLRC) provides sample legal materials—for example, legislative clauses, agreements, terms of reference, or bidding documents—that strengthen the legislative environment and facilitate PPP transaction.
Collaboration on upstream work to strengthen policy and regulatory frameworks for PPPs based on international best practices is being facilitated through the Public-Private Infrastructure Advisory Facility (PPIAF), which works at both the national and sub-national levels. Seventy percent of its grants target the world’s poorest countries.
Common project preparation platforms such as the Global Infrastructure Facility (GIF) and EBRD’s Infrastructure Project Preparation Facility (IPPF) bring parties together to help governments prepare more projects better and faster. The GIF currently has 38 projects in progress with the potential for attracting $19 billion in private sector investment.
The PPP Certification program funded by PPIAF, released in 2016 under the sponsorship of several MDBs, is going from strength to strength.
The PPP Reference Guide provides a concise description of all components of PPPs with references to best practice materials. The Guide, now in its 3rd edition, has been downloaded over 100,000 times.
- The World Bank Group’s now-annual Procuring Infrastructure PPPs assesses governments’ capability in preparing, procuring, and managing PPPs—scoring countries on several points and contributing to an establishment of best practices worldwide.
. From my optimistic perspective, this will make the development of infrastructure projects with private sector participation through PPPs easier and more efficient, especially in emerging economies. In fact, we saw an interesting research note published yesterday that shows that private infrastructure investment (in good part, via PPPs) has recently doubled in the world’s poorest countries.
Going forward, some developments I expect to see include:
Greater use of standard legal clauses and approaches to risk allocation matrices, which will reduce costs and uncertainty both within countries and sectors
Greater access to PPP knowledge and best practices, particularly for government officials who oversee PPP projects
Increasing collaboration among governments, MDBs, and private sector investors through facilities such as the GIF and PPIAF
Growing pipelines of viable PPP projects that are attractive to the private sector
- Increasing interest in infrastructure projects in developing countries, particularly by institutional investors playing a long game
Disclaimer: The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.
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Highlighting a free resource for PPP project development