What is a Public-Private Partnership?
This is a contract between a public sector institution (Government) and a private party in which the private party assumes significant project risk (financial, technical and operational risk) in the design, financing, building and operation of a project.
In order to determine whether a PPP is the appropriate vehicle for procuring a public asset or service, three internationally applied standard tests must be considered: affordability, value-for-money and risk allocation before it can be agreed that PPP procurement represents the best methodology of delivering the needed infrastructure/services.
PPPs have evolved over many years and have become a popular form of infrastructural financing due to capital budget constraints in rapidly evolving cities worldwide.
Some of the common terms associated with PPPs include Private Finance Initiative (PFI) - UK, Japan and Malaysia; Private Sector Participation (PSP) - Development Banks; Private Participation in Infrastructure (PPI) - World Bank; Private Financed Projects (PFP) – Australia and Public-Private Partnership (P3) - North America.
Governments may or may not contribute directly to financing of a PPP. Also the contribution may be cash equity, land equity, other assets and enabling environment/framework amongst others. In projects that are aimed at creating public goods such as public transport, the government may provide a capital subsidy in the form of a one-time grant or some other form of financial support so as to make it more attractive to private investors.
How can I partner with the Lagos State Government?
Government originated projects will need a detailed feasibility study carried out by either External Consultants or Government officials after which a request for proposal (RFP) document is issued to the market for prospective investors to bid. After an independent evaluation of the proposals, a preferred bidder is selected to negotiate with Government which culminates in a concession contract.
However, in the case of an unsolicited proposal emanating from the private sector, the interested party may first of all contact the relevant Ministry, Department or Agency (MDA) to ensure that its proposition is in line with the plans of the agency and the State Government. Thereafter, they are to prepare and submit a comprehensive project proposal either through the MDA to the Office of PPP or directly to the Office. The proposal should contain the following amongst others:
|Nature and scope of the project
|Specific objective that can be met through the project
|Detailed financial plan including source of funding, projected costs and revenues including minimum of 5 years financials
|Feasibility study showing technical, economic and financial sustainability
|Demonstration of technical expertise to successfully execute the project
|Environmental Impact Assessment
|Evidence of company registration and tax compliance (click to download proposal template)
What levels of partnership exists in Lagos State?
Lagos State is open to a range of investment and procurement solutions that promote efficiency, affordability, best risk allocation and value-for-money in public infrastructure investment. The various PPP models employed in the state range from equity participation (joint ventures), various leasing options, franchising, concessions, and variants of the Build-Operate-Transfer (BOT) model.
Do partnerships include Corporate Social Responsibility (CSR)?
The Office of PPP defines partnerships in terms of business ventures that allow the private party to make profitable returns on their investment while meeting a specified public service need. However, if the private sector wishes to engage in CSR activities, it should direct proposals to the relevant MDAs.
Can the PPP Office provide finance for entrepreneurs with viable proposals?
The Office of PPP acts as a liaison between MDAs and the private sector. While Government can jointly finance a project with a proponent, it will rarely finance a project in full as this will be tantamount to the traditional form of procurement where LASG bears the full financing risk. Howbeit, the Office of PPP facilitates synergy between various private parties to progress projects and may introduce prospective investors to relevant financial institutions. Such funds must be secured in line with prevailing commercial conditions.