BOT (Build Operate Transfer)-Modelle
BBO Buy Build Operate
BT Build Transfer
BTO Build Transfer Operate
BOT Build Operate Transfer
BOOT Build Own Operate Transfer
BOOST Build Own Operate Subsidize Transfer
DBO Design Build Own
DBOOT Design Build Own Operate Transfer
DBFO Design Build Finance Operate
DBM Design Build Maintain
BOO Build Own Operate
BLT Build Lease Transfer
BLOT Build Lease Operate Transfer
BRT Build Rent Transfer
BROT Build Rent Operate Transfer
LDO Lease Develop Operate
MOO Modernize Own Operate
1. Build-and-Transfer (BT)
- Private proponent finances and constructs the infrastructure facility and turns
over ownership of facility to government after project completion
- Government compensates project proponent at agreed amortization schedule
2. Build-Lease-Transfer (BLT)
- Private proponent finances and constructs facility
- Government compensates proponent for lease of facility at agreed term and schedule
- Ownership of facility is transferred to government after the lease period
3. Build-Operate-Transfer (BOT)
- Private proponent undertakes construction, financing, operation and
maintenance of facility for a fixed term; collect tolls, fees, other charges to
recover investments plus profit
- Ownership of facility is transferred to contracting government entity after BOT term
- Government provides franchise and regulates activities of BOT contractor
- Government may opt to share in the profits of the BOT proponent
4. Build-Own-Operate (BOO)
- Private proponent finances, constructs, owns, operates and maintains facility in perpetuity; collects tolls, fees, rentals and other charges to recover investments and profits
- Government may assign operation and maintenance of project to a facility operator and provides authorization and assistance in securing approval of BOO contract
- Government has the option to buy the output/service provided by the BOO operator
5. Build-Transfer-Operate (BTO)
- Private proponent finances and constructs facility on a turn-key basis (assumes cost overrun, delay, specified performance risk)
- Title of facility is transferred to implementing agency, government assumes ownership after commissioning
- Private proponent operates the facility for implementing agency under an agreement and is allowed to get compensation for the following: proponents investment costs and reasonable return and, operating charges Contract-Add-Operate (CAO)
- Proponent adds to existing facility being rented and operates expanded project for an agreed franchise period
- Government collects rental payment from private proponent under agreed terms and schedule
- Government re-acquires control over rented property/facility at the end of lease term normally including improvements thereon.
6. Develop-Operate-and- Transfer (DOT)
- Private proponent has the right to develop adjoining property of an infrastructure to enjoy external benefits that the primary investments creates e.g. higher property values or commercial development rights
- Government re-acquires ownership of properties turned over to investor after concession period and may opt to share in the financial benefits of the investment
7. Rehabilitate-Operate-and Transfer (ROT)
- Private proponent takes over operation and maintenance of an existing facility for a franchise period and/or imports existing policy for refurbishing, erecting and cost consuming/maintaining it within the host country
- Government provides franchise To ROT company and may opt tos hare in the profits of the ROT company
- After franchising period, ownership of a facility or equipment is transferred to government
8. Rehabilitate-Own-Operate (ROO)
- Private proponent takes over an existing facility to refurbish and operate with no time limitation imposed on ownership, and can continue to operate the facility in perpetuity
- Government provides franchise to operate and may opt to share in the income of ROO company
What are the modes of implementation for BOT projects?
BOT projects may be implemented through public bidding, direct negotiation or unsolicited proposal.
What are the fiscal incentives granted for BOT projects?
-Projects costing P1 billion and above, upon registration with BOI, shall be
entitled to full fiscal incentives under the Omnibus Incentives Code (OIC)
-Projects less than P1 billion, upon registration with BOI, may avail of incentives under the OIC, subject to inclusion of the activity or project in the current Investment Priorities Plan (IPP) of BOI.
What other tax exemption incentives, reliefs are given to BOT projects?
-Tax exemptions/reliefs in cases of natural calamities, civil disturbance or adverse economic conditions
-Tax incentives to new investments in locality
BUILD-OPERATE-TRANSFER (B.O.T)
While it is true that no two B.O.T projects are exactly the same, they are based on the same principles. Central to any B.O.T project is the 'Concession Agreement', whereby a private entity, also known as the 'promoter', is granted the right to construct, finance, operate and maintain a facility for the period of the concession. This right is granted by the 'Principle', usually the government, and once the period of the concession is over, the fully operational facility is transferred back to the principle at no cost.
The term B.O.T was introduced in the early 1980's by the Turkish Prime Minister Turgat Ozal to designate a Build Operate Transfer project. However, the history of concession contracts goes far back to the thirteenth century. Two of the famous concession contracts in the eighteenth century are the Sues Canal and the Trans-Siberian Railway.
Among the reasons which led governments to choose the B.O.T formula, the following can be mentioned:
The need for infrastructure continues to grow as population and economies grow.
The lesser borrowing capacity of developing countries (debt crises), influences their ability to finance and meet the demand of infrastructure.
Major international contracting firms which, in the mid l970's, had been kept very busy, particularly in the oil rich Middle East, were, by the early 1980's facing a significant downturn in business.
Global trend towards 'privatisation' of sectors that traditionally were the responsibility of the public sector.
The Basic Characteristics of B.O.T There are several characteristics or components that construct a typical B.O.T project:
Host Government - the host government may be the most important participant and it must have a strong believe in the necessity of the project It first has to authorise the project, that may require special legislation. This will be followed by entering into an elaborate implementation or concession agreement with the promoters (the company). This agreement will emphasise the support required by the host-government and the rights and obligations of the company. As to the financing of the project, the host-government may participate in the form of debt, equity or other guarantees.
Promoters/the Project Company - the promoters have to be financially strong and experienced. The complicated process of the feasibility studies and the legal contractual issues are enormously expensive and time consuming. In addition, it is the promoters that may initiate a 'cost sharing arrangement' among all the parties involved in order to enhance commitment to the project. The company may own the facility during the concession period or operate it under a form of a lease. Moreover, in most cases, the promoters will form the 'project company' as the official body to negotiate with. It includes the construction consortium, suppliers, operators, lenders, insurers etc.
Financial Viability - equity investors and lenders must have a clear idea and complete confidence as to the financial viability of the project. This includes the interest payments on loans and return to the equity holders for the risk of the investment. As a result, the company must know the total cost of the project.
Local Partners - in many of the B.O.T projects, the company will contact a local partner. This might be in the form of advisory services, industrial or commercial groups. By doing so, the company may gain the local support or avoiding future obstacles and conflicts from local organisations. In addition, the added value of a local partner is the understanding of the domestic environment in the host-country.
Construction Consortium - at the centre of each B.O.T project is a large construction that should be carried in a relatively short period and should be made to the highest standards available. Therefore, the builders will usually be a well-known construction firm with proven expertise. Moreover, governments usually prefer that the constructions' consortium will be from a different country. It makes the project more acceptable politically, so to avoid a situation where only one company is benefiting from the project.
Financing - most B.O.T projects involve a combination of equity provided by the promoters, and debt that may be provided by commercial banks, international financial institutions and bilateral government lenders. The proportions are usually between 20% - 30% equity and the rest is debt. In addition, the proportion of currencies should be discussed and will depend on the nature of the project and the country involved. Finally, it is well known that B.O.T projects have two major stages. The construction stage, which is at higher risk, and the operating stage which is at a lower risk. As a result, both equity holders and lenders seek other returns for each stage.
Advantages:
One of the major advantages of the concession agreement is that it provides 'additionality'. It means that when the host government has neither the budgetary resources nor the borrowing capacities to finance an infrastructure project, a concession agreement offers the possibility of realising a project that would otherwise not get built.
Concession projects, if correctly structured and implemented, may contribute to the overall economic growth of a country.
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Credibility'- The willingness of equity investors and lenders to take the risks associated with such a form and to make a long term commitment to the project are seen as practical indications by the government that the project is considered viable by knowledgeable experts.
A benchmark for other industries in the country.
Return to the government at no cost at the end of the concession period.
Glossary
Acronyms Used in the Private Participation in Infrastructure Projects Database:
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Amount of Development Bank Support: The resources committed by a multilateral agency to the project under a specific type of support (equity, guarantees, loan, quasi-equity, risk management, or syndication). See Development Bank Support.
Canceled Project: See Status.
Capacity: Size of the project, measured in industry specific units. For energy distribution, water distribution, and telecommunications projects, the capacity is tracked for all years where information is available. For electricity generation, energy transmission, water treatment, and transport projects, the data represents the expected capacity of the fully operational project. See Capacity Type.
Capacity Type: only one capacity type is assigned to a project so capacity type selected is the one that best represents the primary service provided by the project:
KM is used for toll road, railway, energy transmission and telecommunications carrier projects
MW is used for electricity generation projects
Cubic meters is used for water treatment plants
Number of connections (in thousands) is used for telecommunications network and water or electricity distribution projects
Contract Period: The length of time that the terms of a contract agreement are in place and is measured in years.
Contract Termination Year: The year in which the original contract is set to expire. For canceled projects, the contract termination year is the year in which the contract was terminated (see Status) and not the year in which the contract was initially set to expire.
Country: The low- or middle-income country(ies) in which the project has been developed and provides services to the public. Cross-border projects (i.e. the ones that involved more than one country) include all relevant countries.
Country IDA Status: The International Development Association (IDA), member of the World Bank Group, classifies low- and middle- income countries based on the per capita income and ability to borrow on market terms. There are three categories:
IDA: Countries that are eligible for IDA resources on the basis of low per capita income and lack of creditworthiness to borrow on market terms
Blend: This category is used to classify countries that are eligible for IDA resources on the basis of per capita income but also have limited creditworthiness to borrow from IBRD
Non-IDA: Countries that are only eligible to borrow from IBRD based on per capita income
Data in the Private Participation in Infrastructure Projects Database currently uses the 2003 World Bank classification by IDA status of each low- and middle-income country.
Country Income Group: The World Bank classifies developing economies in three groups based on per capita income:
Low income
Lower middle income
Upper middle income
Data on the Private Participation in Infrastructure Projects Database currently use the 2003 World Bank classification by income group of each developing economy.
Cross-Border Project: A project that has been implemented in more than one country. The country designation field of a cross-border project lists all countries in which the project has been implemented.
Development Bank Support: This is financial support that a multilateral institution has given to a project. The types of financial support tracked are:
Equity. Multilateral institutions are allowed to invest in equity except for IADB, IBRD and IDA.
Guarantees. Two types of guarantees are covered:
Political risk coverage against currency inconvertibility, expropriation, war/civil disturbance and breach of contract.
Partial credit guarantees, which turn medium-term finance into a longer-term arrangement by guaranteeing longer maturity or offering liquidity guarantees in the form of put options and take-out financing.
Loan. Direct loan using the multilateral institution funds (also referred to as A-loan).
Quasi-equity. These products have both debt and equity characteristics and some of them are convertible debt, subordinated loan investments, and preferred stock and income note investments (also referred to as C-loan).
Risk management. The risk management products, or derivatives, allow project companies to hedge currency, interest rate, or commodity price exposure. Some of them are currency and interest rate swap, options and forward contracts and derivatives.
Syndication. A multilateral institution arranges the financing with the resources of other investors, but the institution is always the lender-of-record (also referred to as B-loan).
Financial Closure: Closure occurs when there is legally binding commitment of private sponsors to mobilize funding or provide services. The definition of financial closure varies among types of private participation. See definition of financial closure in methodology.
Financial Closure Year: The year in which private sponsors agreed to a legally binding agreement to invest funds or provide services.
Investment in Facilities: Resources the project company invests in facilities. Investments can be either in greenfield facilities or as an expansion or a modernization of existing facilities.
Investment in Government Assets: Resources the project company spends on acquiring government assets such as state-owned enterprises, rights to provide services in a specific area or the use of specific radio spectrums. License fees, canon payments or divestiture revenues are the common revenue collection mechanisms.
Operator: The company that contracts with the government to manage or maintain a facility during a specified concession period.
Percentage Private: The percentage of the project company that is owned by private sponsors.
Primary Sector: The primary sector is classified according to the four infrastructure sectors covered and is defined by the main infrastructure services provided by the project to the public. See Secondary Sector.
Project Company: This is the corporate entity created to manage the project. It is usually incorporated in the hosting country and in most cases the project company is quoted as the project name.
Project Location: This is the area where the facilities are located (for example, toll roads) or the geographic area (for example, water services or telecommunication services) that the project committed to serve under its contract.
Project Name: This is the most commonly occurring or recent name of the project in English. In some sectors, the name of the Project Company is the Project Name. See Related Names.
Region: This is the region to which the low- or middle-income country in which the project has been developed belongs, according to the 2003 World Bank classification.
Related Names: All names other than the project name by which the project is referred to, including abbreviated names, acronyms, old or other names.
Secondary Sector: For projects that provide services across more than one infrastructure sector, the secondary sector is the second main infrastructure service that the project provides to the public. Most common multi-sector projects involve the energy electricity and water sectorsservices. For projects that involve both electricity and water services, energy has been recorded as the primary sector and water as the secondary one. Therefore, aggregated reports attribute investment of those projects to the energy sector rather than to the water one.
Segment: This is the most detailed definition of infrastructure services provided by a project. See Subsector, Sector, and Technology/Fuel. The segments by subsector are:
Electricity - Generation, transmission, and distribution
Natural - Gas Transmission and distribution
Telecommunications - Fixed access, mobile access, and long distance
Airports - Runway and terminal
Seaports - Channel dredging and terminal
Railways - Fixed assets, freight, intercity passenger, and urban passenger
Toll-roads - Bridge, highway, and tunnel
Potable water - Water treatment and water distribution
Sewerage - Sewerage treatment and sewerage collection
Sponsor: Sponsors are private entities that have an equity participation of at least 15 percent in the project. A foreign state-owned enterprise is considered a private entity. If no single sponsor has equity participation of at least 15 percent, the database identifies the sponsor as “Others”.
Status: Infrastructure projects tracked by the Private Participation in Infrastructure Projects Database are:
Under construction projects for which assets are being built
Operational projects that have started providing services to the public
Concluded projects for which the contract period has expired and was neither renewed nor extended by either the government or the operator.
Canceled projects from which the private sector has exited in one of the following ways:
Selling or transferring its economic interest back to the government before fulfilling the contract terms.
Removing all management and personnel from the concern
Ceasing operation, service provision, or construction for 15 percent or more of the license or concession period, following the revocation of the license or repudiation of the contract
Distressed projects where the government or the operator has either requested contract termination or are in international arbitration.
Subsector: The Private Participation in Infrastructure Projects Database divides each sector in subsectors as follows, see Sector and Segment:
Energy - Electricity and natural gas
Telecommunications - Telecommunications
Transport - Airports, seaports, railways, and toll-roads
Water and Sewerage - Potable water and sewerage
Sub-Type of Private Participation in Infrastructure: The Database identifies sub-categories for each of the four types of projects:
Management and Lease Contracts. A private entity takes over the management of a state-owned enterprise for a fixed period while ownership and investment decisions remain with the state. There are two subclasses of management and lease contracts:
Management contract. The government pays a private operator to manage the facility. The operational risk remains with the government.
Lease contract. The government leases the assets to a private operator for a fee. The private operator takes on the operational risk.
Concessions. A private entity takes over the management of a state-owned enterprise for a given period during which it also assumes significant investment risk. The Database classifies concessions according to the following categories:
Rehabilitate, operate, and transfer. A private sponsor rehabilitates an existing facility, then operates and maintains the facility at its own risk for the contract period.
Rehabilitate, lease or rent, and transfer. A private sponsor rehabilitates an existing facility at its own risk, leases or rents the facility from the government owner, then operates and maintains the facility at its own risk for the contract period.
Build, rehabilitate, operate, and transfer. A private developer builds an add-on to an existing facility or completes a partially built facility and rehabilitates existing assets, then operates and maintains the facility at its own risk for the contract period.
Greenfield Projects. A private entity or a public-private joint venture builds and operates a new facility for the period specified in the project contract. The facility may return to the public sector at the end of the concession period. The Database classifies greenfield projects in four categories:
Build, lease, and own. A private sponsor builds a new facility largely at its own risk, transfers ownership to the government, leases the facility from the government and operates it at its own risk, then receives full ownership of the facility at the end of the concession period. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.
Build, own, transfer, or build, own, operate, transfer. A private sponsor builds a new facility at its own risk, owns and operates the facility at its own risk, then transfers ownership of the facility to the government at the end of the concession period. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.
Build, own, and operate. A private sponsor builds a new facility at its own risk, then owns and operates the facility at its own risk. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees.
Merchant. A private sponsor builds a new facility in a liberalized market in which the government provides no revenue guarantees. The private developer assumes construction, operating, and market risk for the project (for example, a merchant power plant).
Divestitures. A private entity buys an equity stake in a state-owned enterprise through an asset sale, public offering, or mass privatization program. The Database classifies divestitures in two categories:
Full. The government transfers 100% of the equity in the state-owned company to private entities (operator, institutional investors, and the like).
Partial. The government transfers part of the equity in the state-owned company to private entities (operator, institutional investors, and the like). The private stake may or may not imply private management of the facility.
Technology/Fuel: This field applies only to the following segments:
Electricity generation - Coal, diesel, natural gas, geothermal, hydro, nuclear, steam, and wind
Fixed access - Cable, microwave, VSAT, and wireless local loop (WLL)
Port terminal - Container, dry bulk, liquid bulk, and multi-purpose
Total Investment: It is the sum of investment in facilities and investment in government assets.
Type of PPI: The Database classifies private infrastructure projects in four categories:
Management and lease contracts
Concessions (or management and operation contracts with major private capital expenditure)
Greenfield projects
Divestitures
The definitions of Types of Private Participation can be found under the definition of Sub-type of Private Participation.
Year of Capacity: The year in which capacity was financed or achieved depending on how a project expands capacity. For projects, whose capacity expands in discrete phases such as electricity generation, energy transmission, water treatment, and transport projects, year of capacity is usually the year of financial closure. For project, whose capacity can be increased continuously such as energy distribution, water distribution, and telecommunications projects, years of capacity are the years for which capacity information is available.
Year of Investment: The year in which investments are committed to the project or in which the transactions take place for divestitures that are phased or where investment requirements are defined by requirements on service coverage and quality and data are available (such as for large privatized electricity and telecommunications companies).
Year of Development Bank Support: The year in which the development bank support was committed to the project. See Development Bank Support.
Year of Percentage Private: Year in which the percentage ownership of the project company by private sponsors changed.
Highlights of the Amended BOT Law
Many BOT Variants Allowed
- Private sector proponents can now use different variants to implement infrastructure projects under the BOT arrangement. The BOT Law allows nine specific variants described in the table below and other modes subject to the approval of the President.
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BOT Scheme |
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Build-and-Transfer (BT) |
Finances and constructs the infrastructure facility. Turns over ownership of facility to government after project completion |
Acquires ownership of facility after construction. Compensates project proponent at agreed amortization schedule. |
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Build-Lease-Transfer (BLT) |
Finances and constructs facility Turns over project to government after completion under lease arrangement Turns over ownership of facilityto government after lease period |
Compensates proponent for lease of facility at agreed term and schedule Acquires ownership of facility after lease period |
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Build-Operate-Transfer (BOT) |
Undertakes construction, financing, operation and maintenance of facility for a fixed term . Collects tolls, fees, other charges to recover investments plus profit Transfers ownership of facility after BOT term to contracting government entity |
Provides franchise and regulates activities of BOT contractor. Acquires ownership of facility at the end of BOT term. May opt to share in the profits of the BOT proponent |
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Build-Own-Operate (BOO) |
Finances, constructs, owns, operates and maintains facility in perpetuity Collects tolls, fees, rentals, and other charges to recover investments and profits May assign operation and maintenance of project to a facilityoperator |
Provides authorization and assistance in securing approval of BOO contract Can opt to buy the output/service provided by the BOO operator |
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Build-Transfer-Operate (BTO) |
Finances and constructs facility on a turn-key basis (assumes cost overrun, delay, specified performancerisks) Transfers title of facility to implementing agency aftercommissioning Operates the facility for implementing agency under an agreement |
Assumes ownership of facility after commissioning Allows private proponent to get compensation for the following: 1. Proponent’s investment costs and reasonable return; and 2. Operating charges |
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Contract-Add-Operate (CAO) |
Adds to existing facility which the proponent is renting and operatesexpanded project for an agreed franchise period |
Collects rental payment from private proponent under agreed terms and schedule Re-acquires control over rented property/facility at the end of lease term normally including improvements thereon |
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Develop-Operate-and-Transfer (DOT) |
Has the right to develop adjoining property (s) of an infrastructure to enjoy external benefits that theprimary investment createse.g.higher property values or commercial development rights |
May opt to share in the financial benefits of the investment Re-acquires ownership of properties turned over to investor after concession period |
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Rehabilitate-Operate-and-Transfer (ROT) |
Takes over operation and maintenance of an existing facilityfor a franchise period and/or imports existingfacility for refurbishing,erecting and cost consuming/ maintainingit within the host country Transfers ownership of a facility or equipment to government after franchise period |
Provides franchise to ROT company May opt to share in the profits of the ROTcompany Re-acquires ownership of facility equipment after franchise period |
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Rehabilitate-Own-Operate (ROO) |
Takes over an existing facility to refurbish and operate with notime limitation imposed on ownership Can continue to operate the facility in perpetuity |
Turns over existing facility to ROO proponent and provides franchise to operate May opt to share in the income of ROO company |
Expanded List of Eligible Projects for BOT-type Implementation
- The following projects are eligible for construction, rehabilitation, improvement, expansion, modernization,operation, financing and maintenance under the BOT mechanism:
Highways, roads, interchanges, tunnels
Rail-based projects with commercial development opportunities
Nonrail-based mass transit facilities, navigable inland waterways
Port infrastructure such as piers, wharfs, quays, storage, handling, ferry services
Airport, air navigation facilities
Power generation, transmission, distribution
Telecommunications, backbone networks, terrestrial and satellite facilities
Information technology and data base infrastructure
Irrigation and related facilities
Water supply, sewerage, drainage
Education and health infrastructure
Land reclamation, dredging and other related development facilities
Industrial and tourism estates
Government buildings and housing projects
Markets and slaughterhouses
Warehouses and post-harvest facilities
Public fish ports and fishpond including storage and processing facilities
Environmental and solid waste management and related facilities
Other infrastructure and development projects as may be authorized by the appropriate agencies or in the case of LGUs, provided the activity falls within the devolved activities given under Sec. 17 of the LGC.
Use of Unsolicited Proposals Allowed
– Any LGU/IA may accept unsolicited proposals on a negotiated basis provided that all the following conditions are met:
· The project involves a new concept or technology and/or is not part of the list of priority projects
· No direct government guarantee, subsidy or equity is required; and
· The LGU/government agency has invited by publication for three (3) consecutive weeks, comparative or competitive proposals and no other proposal is received for a period of 60 working days.
Government Support for BOT Projects Extended
– The following types of government support may be provided to BOT projects, as deemed appropriate by the approving authorities:
a) Cost Sharing – Publicly tendered projects with difficulty in sourcing funds may be partially financed through direct government appropriations and Official Development Assistance (ODA). Government appropriations and ODA financing are allowed up to a maximum of 50% of total project cost.
b) Financial Incentives – Projects costing Php1 Billion and above are entitled to incentives allowed under the Omnibus Investment Code upon registration with the Board Of Investments (BOI).
c) Other Government Undertakings – These may include various credit enhancements such as foreign exchange fluctuation and convertibility, etc. However, direct government guarantees on loans of private proponents are not allowed by law.
More Leeway in Proponent Selection
Under the BOT Law, implementing agencies and local government units deciding to implement BOT-type projects can use either the public bidding mode or resort to the acceptance of unsolicited proposals. A private proponent with the financial resources and the technical capability to effectively implement an infrastructure project may put together a proposal for submission to the concerned government agency or LGU. LGUs and agencies with project due diligence capabilities are, however, advised to use the public bidding mode. This mode has been determined to foster a more transparent and relatively faster process for implementing projects.
Options under the Public Bidding Mode
LGUs and national government agencies involved in BOT proponent selection can use either of two options:
Option 1: Pre-qualification is undertaken prior to the issuance of the request for proposals.
Option 2: The process of pre-qualification is already included in the request for proposals.
Refer to Charts I and II for the process flow under the bidding and unsolicited modes, respectively.
PRESENT PROJECTS ACTIVITIES
AJ GROUP ALONGWITH AFFILIATED / ASSOCIATED COMPANIES UNDERTAKES INTERNATIONAL PROJECTS AS BELOW.
1- B .O.T , BUILD OPERATE TRANSFER
2- B.O.O , BUILD OPERATE & OWN
3- B.O.O.T BUILD OWN OPERATE TRANSFER
4- B.L.T BUILD LEASE TRANSFER
5- JOINT VENTURES IN GOVT & PRIVATE SECTORS
6- PRIVATISATION
PROJECTS INCLUDE CRUDE OIL REFINERY, CEMENT PLANT, POWER PLANT AND CONSTRUCTION OF HOTELS / HOLIDAY RESORTS , HOUSING SCHEMES , ROADS / BRIDGES, HOSPITALS
ALL THESE PROJECTS ARE PARTICIPATED IN FOLLOWING ROLES.
1 - TURNKEY CONTRACTORS / DEVELOPERS
2 - PROJECT MANAGERS
3 - PRIME CONTRACTORS
4 - SUB CONTRACTORS
5 - MACHINERY PROVIDERS
6 - DESIGN & ENGINEERING
7 - BUILDERS , INTERIOR DECORATORS & ELECTRICAL CONTRACTOR.
8- SERVICE PROVIDERS
9 - MANUFACTURERS
10- OPERATION AND MAINTENANCE ( O & M )
11- EQUITY SHARE HOLDERS
12- FINANCIERS , BANKERS , INVESTORS
13- PROJECT ATTORNEYS.
14- FRANCHISE PROVIDER
15- CONSULTANTS
HOW PARTNERSHIPS WORK
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TYPES OF PUBLIC-PRIVATE PARTNERSHIPS |
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Build/Operate/Transfer (BOT) or Build/Transfer/Operate (BTO) |
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Build-Own-Operate (BOO) |
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Buy-Build-Operate (BBO) |
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Contract Services |
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Design-Build (DB) |
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Design-Build-Maintain (DBM) |
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Design-Build-Operate (DBO) |
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Developer Finance |
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Enhanced Use Leasing (EUL) |
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Lease/Develop/Operate (LDO) or Build/Develop/Operate (BDO) |
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Lease/Purchase |
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Sale/Leaseback |
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Tax-Exempt Lease |
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Turnkey |
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Q: Isn't there a danger of corruption when private companies are involved in providing public services?
A: The only way private contractors can achieve long-term success in partnering with governments is to provide quality, value and dependability. As mentioned earlier, private companies have high levels of accountability with the public, media and regulators at various levels. In fact, regulatory bodies tend to enforce regulations more tightly with private contractors than they do with government agencies, realizing that ordering government entities to comply with regulatory requirements can mean increased budget challenges and higher taxes. As a result, both private companies and government officials are under full scrutiny, which minimizes the opportunities for corruption.
Q: Don't private companies take short cuts in providing services in order to increase profits?
A: The reason governments are increasing their participation in partnerships with private contractors is because their constituencies approve of the high quality of services being provided without a commensurate increase in taxes. By reducing the quality of service, a company can reduce the possibility of repeat and/or new business. The profits made by the private-sector in these partnerships come from increased efficiencies, economies of scale and long-term financing that may not be available to the pubic-sector, and not from cuts in the quality of service.
Q: When the private sector is involved, doesn't that mean that citizens will eventually have to pay more for services?
A: There is more than ample evidence to show that public-private partnerships result in a higher quality of services while holding the line on costs. Private-sector partners are able to practice cost efficiencies to hold down expenditures, while also taking advantage of additional revenue streams. In cases where there have been rate or tax increases, it came as a result of upgrading or expanding systems -- and under the terms of the contract signed between the public and private partners. Often, major projects can be undertaken at little or no cost to the public. For example, in the public-private partnership that rebuilt Washington, D.C.'s landmark Union Station, the multi-million dollar improvements were completed without using a dime of taxpayer money. In part, the private contractor is recouping costs from rents paid by retail shops in the facility.
Q: Will the need for public-private partnerships increase, or will we see fewer of them as the economy improves and governments become less revenue-strapped?
A: First, public infrastructure and service needs far exceed the capability of government budgets to meet them. In education, for example, the American Society of Civil Engineers has said that 75 percent of America's school buildings are inadequate to meet student needs. To close this schoolhouse gap would require a capital investment of $3,800 for every student in the United States. Even in better times, school districts won't have the funding to meet this need. This is true in virtually every area of public life, from highways to waterworks. Public-private partnerships enhance the resources and the capability to address pressing public needs.
Second, public-private partnerships aren't just about budgetary issues. Governments are turning to partnerships because they see that merging the resources of the public- and private-sectors makes it possible to improve the quality of services provided to citizenries. The U.S. military, for example, has developed partnerships to build housing for enlisted personnel, resulting in higher-quality living quarters without a large impact on the defense budget.
TOP TEN FACTS ABOUT PPPS
1. Public-private partnerships are just what the name implies.
Public-private partnerships are a contractual arrangement whereby the resources, risks and rewards of both the public agency and private company are combined to provide greater efficiency, better access to capital, and improved compliance with a range of government regulations regarding the environment and workplace. The public's interests are fully assured through provisions in the contracts that provide for on-going monitoring and oversight of the operation of a service or development of a facility. In this way, everyone wins -- the government entity, the private company and the general public.
2. Public-private partnerships are more common than you may think.
Public-Private Partnerships have been in use in the United States for over 200 years. This contractual arrangement between government entities and private companies for the delivery of services or facilities is used for water/wastewater, transportation, urban development, and delivery of social services, to name only a few areas of application. Today, the average American city works with private partners to perform 23 out of 65 basic municipal services. The use of partnerships is increasing because it provides an effective tool in meeting public needs, improving the quality of services, and more cost effective.
3. They are an essential tool in challenging economic times.
Even in the best of times, governments at all levels are challenged to keep pace with the demands of their constituencies. During periods of slow growth, government revenues are frequently not sufficient to meet spending demands, necessitating painful spending cuts or tax increases. Partnerships can provide a continued or improved level of service, at reduced costs. And equally important, partnerships can also provide the capital needed for construction of major facilities. By developing partnerships with private-sector entities, governments can maintain quality services despite budget limitations.
4. Successful partnerships can lead to happy employees.
In many partnerships created today, public employees are retained and usually at equal or improved benefits. one of the greatest areas of improvement for employees is with opportunities for career growth -- private companies spend two to three times more on training and personnel development than their public-sector counterparts, as a way of gaining the maximum efficiency out of every person, and the maximum amount of job satisfaction.
5. Successful partnerships can lead to better public safety.
From Los Angeles to the District of Columbia, local governments have formed creative partnerships with private companies to enhance the safety of its streets and its citizens. By turning over the operation of parking meters or the processing of crime reports to private-sector partners, police officers can spend more time on the streets doing the jobs for which they are trained. This is particularly important as Home Land Security has risen as a concern for many.
6. Partnerships give many children better educational opportunities.
In Washington, D.C., a public-private partnership was instrumental in building the first new school building in the District of Columbia in over 20 years. By working with a private real estate development company, the D.C. school system was able to build a state-of-the-art facility with a modern computer lab, gym and library. Today, school districts in several states are forming partnerships with private entities to build new schools. This is essential at a time when, according to the National Clearinghouse for Educational Facilities, more than 2,400 new schools will need to be built by 2003 to accommodate school population increases.
7. Drivers appreciate public-private partnerships.
These are not easy times for America's roads and highways. Increasing numbers of vehicles means more roadway wear and tear and increasing traffic congestion. In states like California, Virginia and Washington, private-sector companies are working with governments to build toll roads, making it possible to finance construction and upkeep without having to impose general tax increases. In jurisdictions nationwide, governments and private contractors are working to build new roads and expand existing ones to ease traffic congestion.
8. Clean, safe water through public-private partnerships.
The stringent health and environmental standards of the Safe Drinking Water Act and Clean Water Act have caused problems for some local governments without the budget flexibility to make major capital improvements in water and wastewater facilities. Public-private partnerships have enabled the construction of state-of-the-art water management facilities, while using efficient operations to hold down costs to ratepayers and provide a way of meeting those "un-funded mandates" from the federal government.
9. Partnerships make the information revolution accessible to more Americans.
This is the age of information technologies, but there can be a hefty cost of getting a system operating. Through public-private partnerships, many governments are now able to fully participate in "E-government" with their constituents, or effectively coordinate government activities and budgets. Better service, improved tools and saving money are exactly what public-private partnerships are all about.
10. Governments themselves are the biggest supporters of public-private partnerships.
While there can be substantial misperceptions about the value of partnerships, a look at who endorses them should clarify the picture. Federal agencies like the Environmental Protection Agency, the Department of Defense, and the Veterans Administration all use partnerships. And the number of state and local governments using this tool is even greater. For example, the U.S. Conference of Mayors is enthusiastically working with private-sector providers to discuss ways to make partnerships more effective. Numerous surveys indicate why -- governments traditionally realize cost savings of 20 to 50 percent when the private-sector is involved in providing services.
Federal Privatization Paper (1996)
Federal Privatization Task Force (1996): Executive Summary
Introduction
Definition of Privatization Competition & Government Efficiency
Privatization
Competition
Government Efficiency
Definition of Hurdles, Enablers and Incentives
Hurdles
Enablers
Incentives
The Focus of Privatization in the US
Asset Transfers
Outsourcing
Enterprise Transfers
The Three Critical Issues
Valuation of the Asset or Program
Incentivization of the Process
Bargaining Unit Relations
The Four Areas of Underlying Barriers and Enablers
Human Resource Issues
Financial Management Issues
Liabilities
National Security
Possible Next Steps
INTRODUCTION
In the United States over the last couple of years, there has been much discussion centered on how government can work better and cost less. Recently, this focus has led to discussion on whether or to what extent the private sector should be performing many of the activities, functions and services currently being performed by the government. With Washington debating budget deficit reduction and downsizing government agencies, the attention given to privatization, competition and efficiency has greatly increased.
Thus, the National Council for Public-Private Partnerships (NCP3) formed a task force in late 1996 to examine the reasons for the stagnation and halting evolution of federal privatization activities. The Council, in its on-going interest to remain non-partisan and find the "highest common denominator" politically, sought involvement from both federal and private sector representatives and experts across public sector management and across industry backgrounds.
Best practice models, successes and failures, and pilot projects have been presented at previous Council meetings at which federal sector managers and senior officials have participated. Even with this helpful information, little progress has been made. The realities of federal privatization may provide key indicators of this minimal progress:
- Opportunities for privatization, as defined below, are plentiful in the federal sector but the path of successful business relationships and implementation are wanting;
- Federal managers are reluctant at best, outright opposed at worse, to the partnering capabilities afforded through existing federal rules and policies;
- Yet, a number of significant rules and policies remain barriers to the privatization process, while direction and guidance on how to proceed is generally absent, giving federal managers little comfort in taking the measured risk for such relationships;
- Faced with reluctance, delays and failed competitions, the private sector, with its abundant financial and technical expertise and experience, is growing increasingly frustrated, and turning its time and resources to global marketplace instead.
It is with these realities and more importantly with a sense of national interest in improving the public-private sector interaction that the Council formed a task force on federal privatization. The overriding philosophy of the task force was not to determine if privatization was good or bad as a management decision, but to identify the hurdles, enablers and incentives to achieving greater privatization of US government assets and operations. Finally, the task force worked in stages of evolving analysis to:
- Define specific terms of privatization
- Define the barriers and absent policies
- Examine the traditional forms of privatization (asset transfer, outsourcing, enterprise development)
Identify the key impediments and underlying concerns for the success of federal privatization
DEFINITION OF PRIVATIZATION COMPETITION & GOVERNMENT EFFICIENCY
Privatization has become a worldwide phenomenon largely due to its ability to improve performance and reduce the cost of government. Yet despite nearly two decades of worldwide experience with privatization, it quickly became evident to the Task Force that one of its early challenges would be to establish and agree on key definitions. Without a common understanding of the terms and concepts of "privatization", "competition" and "government efficiency" - the various stakeholders in the process will continue to find it difficult to reach consensus on a path forward.
Privatization
The Task Force found that among federal managers there is a perception that privatization is limited to reaching out to private sector to obtain business acumen (e.g., performance measurements/benchmarks, management principles and concepts) and to reshaping federal operations to more closely resemble a private sector business. And while textbooks define privatization as the transfer of ownership of assets from the public to the private sector, globally and within the US privatization has come to mean much more. The Task Force adopted the more common and more practical definition of privatization as a process of wide-ranging economic change that includes public-private partnerships, joint ventures and outsourcing. The change in ownership (or control) of the assets, or the prospect of it, is just the catalyst, however, internal federal agency reorganization, absent the transfer of ownership, control or responsibility to a private party, is not.
Competition
What is the role of competition in the privatization process? Competition is the engine that creates the savings and efficiencies associated with privatization. The federal government should be able to do almost anything cheaper and better than the private sector does, since it does not need to make profit and does not pay taxes. Yet, government is usually only more efficient (or equally efficient) following a reengineering program while the private sector is generally always at a near efficient state. The key difference is that government is subject to periodic competition through the A-76 process whereas the private sector is subjected to constant competition. Creating a competitive environment in which the federal government can migrate to a straight line cost curve is the purpose and end objective of privatization and outsourcing. In fact, privatization itself does not yield annual operating savings. Privatization is simply the process of getting there. Therefore any successful privatization initiative must consider the competitive environment.
For the purposes of this study, the Task Force decided that it would focus on competition between the private sector and government. Competition between government agencies was not included in the definition of competition. While competition between government agencies may result in improved short-term performance for a given operation, over the long-term these agencies are not subject to the same competitive pressures as private businesses, and it is these constant pressures which result in break-through technologies and constant drives for efficiency.
Government Efficiency
When people talk about making government more efficient they are usually referring to making the government work better and cost less. It is generally regarded that the path to becoming more efficient is periodic OMB A-76 studies and annual customer satisfaction surveys. However, doing more with less requires more than periodic competition through OMB A-76 and a change in customer service. Government efficiency is all about effective asset utilization, where an asset is not only physical plant and equipment but also the employees and intellectual capital. For privatization to be successful, competition must be introduces. Competition will in turn force a more efficient government by focusing management on effectively utilizing all their physical assets, disposing of those no longer needed and maximizing employee productivity.
The Task Force, upon clarifying the terminology used by federal managers and private sector representatives for defining privatization activities, then concentrated its attention on cross-cutting issues and terms which would define barriers and absent policies in the federal privatization process. It became immediately apparent to all members of the Task Force that there are clearly defining legislative and policy hurdles and enablers for privatization but few, if any, incentives.
DEFINITION OF HURDLES, ENABLERS AND INCENTIVES
The current federal procurement, acquisition and management process is filled with hurdles, enablers and incentives for and against privatization, outsourcing and partnering with the private sector. As is true for any opportunity to reform, modernize or outright replace a process of governance, the guidance and direction given to federal managers will be critical in creating a culture attune to working more closely with the private sector. The Task Force examined a number of ways in which existing laws and rules would either foster greater reliance on the private sector or cause managers to resist such relationships.
Simply, both federal and private sector representatives called a foundation on which privatization could be built: A consistent philosophy and methodology that is defensible to Congress, Agency heads and the Administration.
Our definition for these hurdles, enablers and incentives established a grid on which an analysis of required changes, amendments, new legislation, or simple education and training would alleviate any confusion and resistance.
The Task Force desired to communicate a very simple analysis which considered such elements as true cost accounting for scoring, true savings to the taxpayers, positive tax impacts from the creation of new enterprises, etc.
Hurdles
Federal managers and decision-makers have stated that others are a number of hurdles, which exist in determining when and how to respond to private sector involvement. From CBO scoring to perceived fear of failure, managers expressed a concern that no matter how much encouragement or congressional demand for privatization, changes must take place in rules and senior management perception of striking a balanced business relationship. A critical hurdle cited by both sectors, by way of example, is how a clear valuation of the asset or investment is handled in the budget process.
Enablers
This is not identification of the carrot and stick dynamic, rather federal managers and private sector representatives noted that congressional and Administration leadership is required to enable both sectors to work more closely together. Enabling the process of privatization includes the signaling to the federal culture that such relationships are not only necessary but also encouraged through the removal or barriers. For instance, the Task Force recognized that during times of crisis or emergency, swift response and urgency often was enabled through the temporary removal or cumbersome paperwork - why not make this an on-going process?
Incentives
No matter how much congressional intent exist for privatization, changing the federal culture will be difficult. Instead, federal and private sector representatives called for a series of incentives that fostered collaboration and cooperation between the sectors to the benefit of the taxpayer and the long-term needs of the nation. No manager will be committed to reducing the size and cost of government if, by doing so, such action means the end of their career. Whether anachronistic or better provided by the private sector, federal managers see no incentive to move forward. From the ability to maintain some of the proceeds from a privatization to continue further efficiency initiatives to pension portability, representatives of both sectors acknowledged that a specific set of incentives needs to be formalized and accepted by congressional and Administration leadership.
Once the Task Force became comfortable with the terminology and definitions of the privatization process, it settled down to analyzing the three traditional forms of federal privatization. While an inordinate amount of time was spent on these definitions, it was vital to have all participants agreeing to the same viewpoint before the in-depth examination of specific case studies and current decision-making.
THE FOCUS OF PRIVATIZATION IN THE US
Privatization takes many forms, covering a vast array of government assets, enterprises and operations. The nature of the assets being privatized or to be privatized provides a useful means of classification. Broadly, privatization efforts can be classified as "asset transfers," "outsourcing" or "enterprise transfers."
Asset Transfers
Asset transfers include:
- The transfer from the public to the private sector of non-operating assets such as physical property (land, buildings, equipment, machinery, etc.); and
- The transfer from the public to the private sector so asset based (typically infrastructure) operations such as water, wastewater, ports, airports, roads, railways and similar assets.
Outsourcing
Outsourcing occurs when the government contracts from the private sector for services or products that are being or have traditionally been performed or provided by government employees. Responsibility for service or product delivery is delegated to the supplier/contractor while the government retains oversight authority.
Enterprise Transfers
An enterprise transfer is the transfer of ownership from the public to the private sector of an operation or function (a going concern), which is producing a marketable good or service. The transfer may include people, intellectual property, facilities and other assets.
Our analysis reviewed the experience and obstacles faced by government in successfully transferring assets and enterprises or in undertaking an outsourcing. Cases we reviewed include:
- Department of Energy Precious Metals Sales
- Department of Energy Sale of Oxnard, California Facilities
- Redevelopment of US Postal Service, City Post Office Transaction
- Miami Conservancy District - Franklin Area Wastewater Treatment Plant
- DC's Correctional Treatment Facility
- Foothill/Eastern Toll Corridor
- US Investigation Services Inc.
- Naval Air Warfare Center, Indianapolis
- United States Enrichment Corporation
- Conrail
- Military Housing
- Coast Guard
- Department of Energy, Richland Operations - Hanford Laundry
- Defense Mapping
- Weather Services
- Research, Development, Test & Evaluation
- Vessel Trafficking Services (VTS)
The several months spent examining these case studies and on learning the commonalities of the process - regardless if the privatization was an asset, a program, or the creation of a new enterprise - fostered much debate and discussion on a set of critical issues. These issues, it was determined, were common threads throughout the process and if remained unanswered would continue to plague the process and continue the stagnation in the public-private relationship.
THE THREE CRITICAL ISSUES
The Task Force, after nearly five months of debate and discussion, was able to reduce the current state of privatization to three big issues standing in the way of future success. Tackling the entire array of hurdles preventing federal privatization from advancing seemed not just overwhelming to federal and private sector representatives, but a way to get mired in the various constituency interests potentially leading to little on no consensus. If Congress and the Administration, collectively or individually, were to promote privatization, outsourcing and partnering as government reform, competition or efficiency, then according to the Task Force members critical attention should be given to these three 'global' issues as a priority. Based on a matrix process which across agencies, across jurisdictions, and across the private sector, these three issues surfaced as challenges that - once addressed - would make many of the other issues much easier to confront. For purposes of this executive summary, we have included just a few milestones of the discussions and resulting findings.
Valuation of the Asset or Program
From two different perspectives, valuation of the possible privatization target appears to be a significant hurdle. First, federal managers expressed concern that once a valuation was defined, immediate questions arose as to how the offsetting impact would occur for CBO scoring and internal budgeting. And federal managers repeatedly cited the question from senior leadership and/or congressional oversight: was this the best valuation, the best return on the investment?
For the private sector, the issue of valuation remains a hurdle as long as the rules for establishing such valuations are based on perceived highest maximum returns versus realistic market conditions and competitive pricing. In turn, valuation discussions among private sector representatives recalled previous case studies and examples in which valuation was required to consider both productive assets as well as non-productive, burdensome assets which could drain the cashflow from putting a business together.
Incentivization of the Process
Private sector representatives noted throughout the Task Force meetings that federal managers, while in most cases sincere about responding to inquiries about privatization, often remained luke warm to moving forward. The necessity to incentivize the process is based on the current posture of the public sector partner in any potential business relationship. As found in the base closure and in a number of difficult privatization initiatives, federal managers are reluctant to end their careers or diminish their responsibility without some clear and warranted knowledge of an alternative future professional and personal agenda.
Federal managers expressed reservation about finalizing the privatization process unless answers were provided to concerns about pensions, reality of ESOP and stock ownership, training for other government positions, etc. In turn, federal managers states outright that if the process led to a reduction in workforce and asset management budgets, could some of the savings be utilized to either incentivize further efficiencies of to enhance relevant on-going work in other venues. In a move for deficit reduction, the process was not taking into account the need for creating a culture of competition and/or efficiency as long as federal managers felt penalized in the short-run.
Bargaining Unit Relations
Both federal and private sector representatives acknowledged the positive or negative impact bargaining units could have on the future of privatization. All politics aside - for which this issue has and could continued to be seriously debated - bargaining units will be part of the initial examination of a privatization activity and therefore require address sooner rather than later. Case studies and examples of previous privatizations include positive bargaining unit roles - from negotiating the stock valuation and ownership in a future ESOP to directly investing in the new enterprise as a joint venture partner. However, bargaining units in many cases have become critical hurdles because of the failure to recognize their role, lack of communications between the sectors, or inability to understand the business model of a privatization.
In addition to the three critical issues outlined above, there are four fundamental areas of underlying issues that must also be addressed, not only from a regulatory and legislative perspective but also from the private sector, if privatization is to proceed effectively and with maximum benefits to the stakeholders.
THE FOUR AREAS OF UNDERLYING BARRIERS AND ENABLERS
Human Resource Issues
As long as federal government employees view privatization as "bad", achieving successful privatization will be an extremely difficult task. This view stems from uncertainty. Lack of communication and retraining combined with the poor portability of the CSRS pension scheme lead to significant uncertainties in the minds of all federal employees in functions that might be privatized. It is of paramount importance that these uncertainties be removed. Changing the rules regarding CSRS, allowing early retirement without penalty to those over 50 in privatized departments and priority internal placement could all help to reduce the uncertainty and make privatization more palatable to federal employees. If employees do not "fear" privatization then it has a greatly increased chance of success.
Financial Management Issues
Remaining "inside the box", focusing on short term versus long term financial benefits of the transaction when creating privatizations can have an adverse impact on the decision. Managers should be allowed flexibility to create innovative financial transactions without the undue concern over whether the transaction will be approved due to short-term financial concerns. In this regard, longer financial planning horizons and the broader application of lifecycle costing analyses would enable the privatization process. Federal clawback legislation requiring repayment of all outstanding federal grants in full prior to the privatizing agency or department receiving any of the financial benefits of the privatization transaction should be addressed. In addition managers should be free to adopt creative tax incentives to encourage the best ongoing financial savings to the government's operating budgets.
Non revenue generating assets and negative value assets represent a significant problem to managers looking to privatization as a solution. In many cases, these assets can only be disposed off by combining them with more attractive assets. This requires managers to have the ability to sell other assets at below market value in order to persuade the purchaser to take on the non-performing assets. This results in the elimination of operating costs to sustain non performing assets which reduces the budgetary need on an ongoing basis, and should not be prevented by a need to gather one off reductions in the budget from sale proceeds.
Liabilities
In many cases federal assets are not subject to the same legislation as private sector assets. Environmental liabilities associated with such federal assets can, at the time of privatization, be significant and unknown. The ability to indemnify any private sector company purchasing the assets is an important part of the privatization process, especially in any type of joint venture or public-private partnering initiative where legal liability may be uncertain.
In addition, lack of knowledge on part of local and federal officials regarding the degree of environmental contamination of properties poses a significant obstacle to successful asset transactions. Code regulation in the private sector e.g. OSHA does not apply to federally owned assets. Consequently, when assets are transferred to the private sector there is usually a significant investment required to bring assets up to code compliant status. Such costs adversely impact the value of the asset or business the asset is a part of. As a result there is frequently a gap between the value of an asset for continuing government use and the value of that asset for the same use in the private sector.
Legislation should allow for such transactions to take place as it allows the government to achieve the desired operating cost reductions that step from the competitive private sector environment. If the transaction is blocked due to valuation principles these benefits will be lost.
National Security
Much of the privatization opportunities exist in and around Department of Defense and Energy facilities, laboratories and programs. In turn, many of these opportunities are impacted by national security issues such as access to intellectual property, equipment and expertise which - if placed in the wrong hands - could lead to a potential threat from domestic or international sources. While private sector representatives acknowledged that no CEO or President wished to be blamed for a breach in national security, review of security impacting business relationship needs revamping and expediting. And as noted a long tradition of partnering with the private sector in large acquisitions and program development. Thus, as privatization, outsourcing and partnering reaches into new territory, those traditional processes should be enhanced so as to address expeditiously the business opportunity.
POSSIBLE NEXT STEPS
The federal Task Force on Privatization hosted by the National Council for Public-Private Partnerships has conducted a thorough analysis of the privatization arena at the federal, state and local levels so as to build a set of case studies and examples - both successful and unsuccessful. These case studies have allowed federal and private sector representatives from across the country - not just inside the Beltway - provide commentary about the opportunities and challenges in advancing a privatization agenda. The realities of the political context in which privatization operates was not forgotten; however, Task Force participants in both sectors sought to find highest common denominators which would lead to immediate and near-term success.
Even among private sector representatives, debate occurred about the tact and posture to take both the political and bargaining unit arenas. While some members urged stronger responses, all members concurred that the interest in the long run was to have technically - and financially solid business opportunities, which were defensible before congressional inquiry and Administration review.
Therefore, the Task Force proposes the following for consideration by members of the Congressional Privatization Task Force:
- Members of the National Council for Public-Private Partnerships' (NCP3) six month-long task force have done the work of analysis and data gathering. While not as exhaustive as some congressional members may desire, the findings and draft final report provide the basis or foundation for the Congressional Task Force;
- Through the work of the NCP3 task force, identification of a set of hurdles, enablers, and incentives has been drafted thus allowing busy congressional members to focus on action and results than analysis and study;
- In turn, three significant issues have been identified which - if given congressional attention - could result in critical movement in the privatization process, thus leap-frogging the current stagnation and minimal outcomes. Focused debate and discussion by congressional members on the valuation, incentivization and bargaining unit issues could provide the public forum for serious consideration of mutually beneficial resolutions;
Members of the NCP3 Task Force and the entire NCP3 membership are prepared to serve as facilitators and advisors to the Congressional Privatization Task Force so as to enhance the knowledge and skills required for a positive and successful mission. NCP3 has shown its interest and intent in the privatization arena through its annual meetings, training sessions and the support of its own task force comprised of federal and private sector representatives. This grassroots level activity spans both parties and all geographies.
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