Photo Credit: Thomas Hawk via Flickr Creative Commons
I worked with Partnerships BC on its disclosure policies for public-private partnerships (PPPs) for over a decade, and it’s a field that continues to be more interesting with each passing year. You read that right – this very legalistic area of the PPP process, with its formal, official requirements – continues to change, engage, and surprise. That’s because disclosure, at its core, depends on collaboration, and collaboration is all about trusting relationships.
Governments with effective PPP enabling frameworks have already figured this out. It doesn’t matter if that particular government operates in an emerging economy or a developed market. What matters is what stage of their PPP program they are in, and what disclosure policies they have committed to so that they can establish credibility with bidders as early as possible.
Active antennae required
Partnerships BC was created in 2002 and since that time it has participated in more than 75 PPP proposals and projects. (The World Bank’s A Framework for Disclosure paper goes into great detail on Partnerships BC’s contributions to and impact on the PPP market.) When it comes to disclosure processes, Partnerships BC is at the center point between the two sides of the market: the private sector, which always wants more disclosure and more information, and which is leery of providing information available to competitors; and the public sector, which wants to adhere to and protect Freedom of Information legislation.
There’s a lot of tension in the middle – where Partnerships BC lives and breathes – and part of its mandate is to work out a fair compromise for all and revise it over time, as circumstances demand. Both sides drop in frequently; the private sector, for example, is always very open with suggestions about how the market could be improved. So Partnerships BC operates like antennae, picking up all the relevant information, timely data, and atmospheric qualities in the environment. Ultimately this information is transformed into policy.
Living and breathing this middle ground allows Partnerships BC to link effective PPP disclosure policies with a collaborative approach to PPP agreements.
Here’s the context: In a procurement process, ideally the length of time between when one declares a preferred proponent with bidding/evaluation criteria, and financial closing, is the minimal amount of time possible. In British Columbia, and in most places in Canada, that length of time is between 60 and 90 days. In developing countries, however, this can take one to two years. There are a number of reasons for that. One important reason is that they don’t really get down to negotiating the PPP contract until they’ve got a preferred proponent. The impact of this “closing gap” can be very costly and risky to the government.
This is where a collaborative process, paired with a mindset that recognizes the benefits of disclosure, makes all the difference. If you give the draft PPP agreement to the shortlist bidders at the RFP stage, you can then have interactive meetings and collaboration. Some will be just with one bidder, some will be with all bidders. Trust between the private sector and the government, plus a Fairness Auditor, provides comfort to all participants that commercially sensitive information is protected from disclosure. During the process, parties work toward resolving issues in that forum, so that by the time bids are in, there are no more negotiations – because the PPP agreement has been decided on. It’s no longer about terms and conditions of the contract, and that’s critical.
But it’s not an easy solution for every country to swallow. Some officials are concerned about the transparency of the scenario I just described. They don’t do a lot of collaboration because they’re so worried about what the outside world will think of these meetings going on – they may ask “Will one bidder trust another bidder?” and so on.
The end result? They don’t collaborate, and this leads to very long closing periods. From my perspective, that’s an important disclosure issue that developing countries should be working on.
If governments have a solid disclosure process in place from the start, here’s what will naturally follow: there will be collaboration meetings, the deal will have to be defended in public as part of the process, there will be comments from individual bidders, circulated to all bidders and this will result in changes to the documents that benefit both sides. It’s a process that has the “trust-but-verify” principle built into it, although there will always be differences among markets.
Moving beyond mindset
Earlier, I mentioned the value of a mindset that recognizes the benefits of disclosure. In my experience at Partnerships BC, that mindset almost immediately became the formal way of doing business. It happened fast because procurement processes are legal processes and you can’t make up your mind about things as you go along. You have to be very clear because a lot of money is invested in the process and requirements must be followed. The bidder needs to know what will be disclosed and released; invariably they ask, “What are we going to learn about the project, when are we going to learn it, and how are we going to protect our information from our competitors?” All of those questions have to be answered immediately with policy statements. Because the procurement process is so formal and legalistic, a disclosure policy has to be formalized, accessible, and readily available.
Partnerships BC created a disclosure policy that fulfills these requirements. The ultimate goal is to create an attractive bidding environment that doesn’t infringe on commercial sensitivity and at the same time provides as much information as possible to the public. In my experience at Partnerships BC, we share our experience with others in the spirit of collaboration, the core principle we preach.