Public Private
Partnerships are often a long-term
contract between a governmental body and a private entity. The goal of the
partnership is to provide some public benefit, either an asset or a service. A
key element of these contracts is that the private party must take on a
significant portion of the risk, because the contractually specified
remuneration typically depends on performance. Such agreements can best be used
to fund and implement infrastructure projects, providing a solution to problems
of financing, job completion, and investing in large projects without
sacrificing public finances. Return on Investment is often greater than if
either party, private or public, goes it alone, since innovative designs and
financing approaches become available when the two entities work together.
The population demands modern infrastructure and
facilities that works and works well. Meaning, such plant and equipment must be
well constructed, operated and maintained to its designed purpose. Facilities
designed and constructed to withstand foreseeable natural and man-made
disasters, with high safety practices and low records of unscheduled downtime.
Such infrastructure must be affordable, firstly in its construction cost and
commissioning, and ultimately in its operational and maintenance cost, to
deliver inexpensive public services, such as; Water storage, treatment and
distribution, Electricity generation and distribution, mass Transportation, Telecommunications,
Sport and Community stadiums, etc. Financed, constructed and commissioned with private
funds, on public lands backed with operational license (legal paper assets) granting
ownership rights for a fixed period.
Pre-contract requirements, such as; preparing,
advertising and evaluating tenders, and negotiating and awarding the finish
contract, are funded by the relevant public regulatory agencies, while the
hopeful private contractor will fund its bidding activities; securing tender
documents, preparing and submitting tender bids, along with additional cost to
win the contract. This contract will address construction funding, borne by the
private contractor; its share and bondholders, its private equity and
investment bankers. The contract also sets operating terms and conditions for
fixed periods; for example, 10 to 30 years or the natural life of the facility,
and terms overseen by the regulator, such as; set public prices, annual
principal repayment, operational and maintenance (management fees), minimum
annual interest rate and taxation policies.
An Independent Office of Budgets must be given the
responsibility of forecasting a long-term, ten to thirty-year budget, incorporating
the resulting effects and projected fixed and variable payments towards such
contracts, in legal concrete. These contracts, included in financial bills,
must be approved by the full legislature, no matter who presently holds
political or executive power, to offer comfort to investors. With the
allocation made by the budget office and the appropriation bill passed by the law-makers,
for a 10-year period, such a contract is judged to have tradable financial
value. Hence, allowing the appraisal of risks, the full costing of planning,
constructing and commissioning, the measurement of the project feasibility, the
issuance of bonds and other debentures, incorporating bonuses and penalties for
time and cost overruns, in advance of seeking tenders.
Rationale
T.A.J
& Associates Company Limited uses this occasion to
comment on topics that have been covered, both academically and by the
mainstream media, to add its opinion and point out investment opportunity, not
to invoke any social action.
