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2023 | Book

Revisiting Public-Private Partnerships

Lessons from COVID-19

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About this book

This edited volume discusses the resilience of public-private partnerships (PPPs) in the wake of the COVID-19 pandemic. Using a comparative lens, the book assesses the degree to which global PPP infrastructure projects have been affected by the pandemic and details short term and long-term measures undertaken by governments and private parties to mitigate disruption to infrastructure delivery. Secondly, it focuses on improving the state-of-art knowledge by suggesting future directions to be taken by governments, practitioners, and researchers in order to create resilience in infrastructure projects when using PPPs as the delivery model. Chapters present diverse case studies of PPP governance across countries, covering topics such as regulatory issues, risk management, financing, contractual governance, arbitration, and stakeholder management. Providing a systematic review, assessment, and research agenda on lessons learned from the pandemic, this volume will appeal to researchers and students of public administration, public economics, construction management, infrastructure management, and public management, as well as practitioners and government professionals.

Table of Contents

Frontmatter
Introduction
Abstract
COVID-19 is an unprecedented pandemic of modern times that has affected the social and economic fabric of countries across the globe. In this context, the impact of Covid-19 on the Public-private partnership (PPP)s which are prominently adopted and widely used infrastructure delivery models across the world, is an important research topic. In this regard, the main aim of this book is to provide a systematic review, assessment, and research directions on pertinent issues of governance of PPPs. With the help of lessons learned and through the way of stimulating further research, PPPs can emerge as stronger and more resilient infrastructure delivery models.
Tharun Dolla, Ganesh Devkar, Boeing Laishram

PPP Review, Policy and Administration

Frontmatter
Resilience in Public Private Partnerships: A Systematic Literature Review
Abstract
Public-private partnerships (PPPs) are a prominent delivery model for building infrastructure. However, given the complexity of PPP models and the criticality of public infrastructure assets, there are often mixed and diverse studies on this topic. Many systematic studies have examined the literature published on PPP. However, there is no study that focuses on the resilience of PPP retrospectively to draw research gaps or ways forward for the future. This chapter reviews the literature on PPPs by adopting a systematic literature review methodology. Accordingly, the trends of publications, and more importantly, the research themes that covered resilience of PPPs are shown. They are risk allocation and management (RAM), failure mechanisms (FM), governance strategies (GS), flexible contract mechanisms (FCM), financial viability and capital structure (FVCS), revenue guarantee (RG), renegotiation framework (RF), concession period optimisation (CPO), and asset pricing/valuation mechanisms (APV). The findings reveal that the use of resilience concept is sparingly present in PPPs. In particular, risk assessment and management is the most focussed area and concession period optimisation is relevantly less focussed area. These resilience focuses are spread across the procurement phases of PPPs.
Nicola Thounaojam, Tharun Dolla
Federal Road Infrastructure PPP in Germany: The Impact of COVID-19 and Lessons Learned
Abstract
The purpose of this chapter is to delineate and analyse current adjustments of Public Private Partnerships (PPP) in Germany in the context of the COVID-19 pandemic. Based on current data and official material, road infrastructure PPP was analysed, as demand for transportation services is highly sensitive to fluctuations of overall economic activity. Accordingly, they do not only offer a good illustration of the challenges encountered by PPP operators in general but also – as road infrastructure PPP in Germany exist in different designs – important lessons may be learned with respect to their respective resilience in extraordinarily adverse economic conditions.
One finding from the COVID-19 pandemic in Germany is that the case for public–private partnerships (PPP) become more compelling, also as an integral element of a large-scale reform package to massively improve the resilience of public service delivery to citizens and companies alike. Another important insight from the pandemic and the politico-administrative countermeasures is that massive pressure – both financial and in terms of the workload on the human resources employed – has been placed upon existing PPP, especially in critical infrastructures. The principal reasons are unforeseen or unexpected changes in user behaviour, affecting demand, and more difficult access to funding. These new insights demonstrate the relevance of anticipation of such events in the PPP contract, and the role of preparation for practitioners on both the private as well as the public side. Moreover, the findings provide leeway for further research on how the public administration, in particular in a federal multilevel system, can strengthen knowledge management and information exchange between single entities and stakeholders, and the role of PPP units as potential gatekeeper within this system.
Rahel M. Schomaker, Andreas Knorr, Alexander Eisenkopf
The Impact of Covid-19 on PPP in Ireland
Abstract
Public private partnership was introduced into Ireland during the 1990s as a way of promoting infrastructure, while also being seen as a means of emulating UK-style new public management approaches to procurement. Public private partnership in Ireland was backed by advisory bodies and consultants who promoted it as a way of bringing efficiencies into the public sector. Projects in education and roads were followed, after the global financial crisis, by a series of projects in justice, health and, more recently, in social housing. The financial crisis provided fresh impetus for public private partnership in Ireland when it was used to support the construction industry and as an alternative means for infrastructure funding. Public private partnership gained legitimacy through the establishment of the National Development Finance Agency, which acts as a central governmental public private partnership procurement body and provides expertise within government departments as well as a stable legal and regulatory framework. This chapter explores the impact the Covid-19 pandemic has had on public private partnership in Ireland by examining two distinct periods of time – March 2020 to May 2020 and January 2021 to May 2021. These two periods correspond to government reactions to the pandemic when, so called, ‘lockdowns’ occurred. Through the use of political speeches, government reports, media reports and academic literature, we examine the impact of Covid-19 on public private partnership in Ireland. We note that past lessons from the financial crisis in Ireland have helped the country in its handling of public private partnership during the pandemic.
Gail Sheppard, Matthias Beck

PPP Financing and Contractual Governance

Frontmatter
Public–Private Partnerships to Face the Challenges of Covid-19 in Italy
Abstract
During the first wave of the COVID-19 pandemic, when Italy, like many other countries across the world, were in trouble to find enough masks and ventilators, Italian public and private organizations showed an extraordinary ability to forge new collaborations. These partnerships have been created in a hurry and without preconceptions, with the sole objective of giving an immediate response to the looming health crisis. Such experiences have been welcomed as a renaissance of the public–private collaborative model. Furthermore, confronting the huge need to quickly spend the Next Gen budget, Italian public authorities seem to have successfully overcome their fears and skepticism toward PPP, which, before the pandemic, hindered the development of partnership models. The chapter offers an overview of the state of the art of PPP in Italy and a vision for strategic PPPs as an instrument to respond to current social, digital, environmental, and economic challenges, not just to increase the pool of public money, but mainly to quickly implement new investments and services.
Nunzia Carbonara
PPP Procurement and Governance in India: Lessons from COVID-19 and Way Forward
Abstract
The COVID-19 pandemic is a black swan event and has had a major impact on Indian infrastructure and its financing. The impact on infrastructure has been both from the demand and the supply side. In terms of its treatment, the COVID-19 pandemic is a non-political force majeure event in the Indian Model Concession Agreements and the relief provided is extension of the concession period by the force majeure period. Efforts have also been made to address the issue of concessionaire’s liquidity during this period. However, the pandemic slowed down the economy and infrastructure investments. Implementation of India’s first National Infrastructure Pipeline (NIP, April 2020) was also impacted adversely, at least in the two pandemic years (Financial Years 2021 and 2022), as public sector resources were constrained because of the high priority expenditures associated with the pandemic, and private sector investments suffered from increased risk. The conclusion of the paper is that Concession Contracts for PPPs are of long-term duration and some glitches would occur on the way. Rather than have knee-jerk reactions like “cash support …to sustain operations,” which are in the nature of contract renegotiations because they go beyond what is provided in the contract, upholding the sanctity of the contract will allow time for these temporary setbacks to work themselves out. This has come out to be true as, in March–April 2022, there has been an upsurge in demand across sectors, including the badly bruised aviation sector, and profitability in the sector is much improved.
Kumar V. Pratap
Covid-19 Impact on the Highway Sector PPPs in India – Government Support and Implications on Financial Agreements
Abstract
Covid-19 pandemic has caused worldwide havoc on all forms of economic activity between 2020 and 2022. Apart from causing sickness to half a billion people globally, it also made a number of businesses sick. India was no exception. In addition to handling the health crisis, Indian public authorities put into operation various relief measures for businesses to tide over the economic crisis. In this chapter, we study the effect of the pandemic on PPP projects in India and the measures used to mitigate the risk. Using the case of seven toll road projects operated by IRB Infrastructure Investment Trust Fund, we demonstrate how the pandemic affected the road projects and how they bounced back within a year. Lockdowns imposed to tackle both the first and the second waves of the pandemic had a direct effect on toll revenues. Relief measures like moratorium on loan repayment and interest payment, lower interest rates, working capital interest capitalization and increasing working capital drawing limits were some of the measures announced by the Reserve Bank of India. National Highway Authority of India also helped the projects by extending the concession period and deferring premium payment. We see that all the seven road projects could regain pre-pandemic revenue levels within a year. Also, because of the relief measures, the Fund was able to service its loans without defaulting. We suggest that relief measures are set off automatically in case an unforeseeable event like the pandemic occurs in the future, if it has been previously declared to be a force majeure condition in the concession agreements.
Mukkai R. Aravindan, A. Thillai Rajan
Contractual Governance in Public–Private Partnerships in the USA: Key Clauses and Impacts of COVID-19
Abstract
When the COVID-19 pandemic struck the USA and the world in 2020, few could imagine its devastating social and economic impacts. Speculation began about the pandemic’s effect on public–private partnerships (PPPs). Indeed, concerns about decreased user-fee revenues and government budgetary shortfalls were acute. This chapter examines pandemic-related impacts on PPPs in the USA since its onset in 2020. First, an overview of the decentralized PPP market in the USA is provided; this market is one where state and local decisions have significant influence on PPP projects and contractual designs. Second, two case studies of highway PPPs in the state of Virginia are explored. The Elizabeth River Tunnels (ERT) project reached financial close in 2012 and opened to traffic in 2016. The I-95 Express Lanes project also reached financial close in 2012 and opened to traffic in 2014. Both are revenue risk (toll concession) arrangements, and they have nearly identical contractual structures for granting relief for adverse events, changes in law and force majeure events. Both experienced significant drops in traffic and revenue in 2020, particularly in the spring when lockdowns were in full effect. Despite these impacts, neither project experienced any formal claims for relief. The evidence from the two cases suggests that the combination of clear contractual provisions, longstanding counterparty relationships and mutual interests deterred such claims. These findings have important implications for future research into the effectiveness of contractual and relational governance complementarity in PPPs as well as consideration of relational practices such as co-location and partnering during PPP implementation.
Michael J. Garvin, Manik Ahmed

Risk Management

Frontmatter
Governance for Sustained Success of PPPs During COVID-19: The Case of Ogal Shiwa Project
Abstract
In Japan, infrastructures built in the 1970s are aging en masse, and the country is facing a significant shortage of funds for renewal investment. In response, the national government is encouraging local governments to promote compactization (compactization is defined in this chapter as the creation of efficient and sustainable cities (so-called compact cities) in which the various functions necessary for the lives of residents and the local economy are close to each other) to concentrate infrastructure investment in specific areas and to utilize PPP.
Moreover, the national government has notified local governments to instruct private businesses not to bear excessive burdens in light of the fact that the spread of an infectious disease constitutes a force majeure event, so that PPP projects will not fail due to the COVID-19 pandemic. Although the number of new cases of infection is currently at an all-time high, the number of severe cases is declining, and there have been no cases of PPP projects failing as a consequence of the pandemic.
As a case study, this chapter introduces the Ogal Project in Shiwa Town, Iwate Prefecture. It is a complex project, combining the town-owned land (about 10 hectares) and nine sub-projects, including a town hall, library, commercial facilities, and a childcare center. The project has been a success, with the establishment of many attractive facilities which attract more than one million visitors per year.
The following three points were evident through this case: (1) effectiveness of compactization (successful in combating aging infrastructure and compatible with infection control), (2) effectiveness of clear risk sharing between the public and private sectors (easy coordination between the public and private sectors and faster response), and (3) effectiveness of the PPP agent involved in unifying the concept across the project.
Yuji Nemoto
Revisiting Issues and Challenges in Indonesia’s PPP Water Supply System: A Case Study
Abstract
Indonesia has long seen the public-private partnership (PPP) as a viable option to help address the shortage of water supply due to a lack of public funding capacity. However, attracting the private sector to participate in the water supply system is far from simple, despite enormous investment opportunities. This chapter discusses the sector’s issues and challenges using a case study, a large-scale, cross-provincial, and unsolicited project, the epitome of Indonesia’s complex PPP water supply project. The selected case study project is also the first national PPP water supply project. Indonesia’s water supply system comprises intake and production units (upstream), distribution, and service units (downstream). Upstream and downstream are inextricable but can mismatch if not well managed. The mismatch risk is particularly relevant to projects like the case study project because up- and downstream are under the responsibility of different agencies. This chapter focuses on the issues and challenges related to the risk, which have simmered for years, but the emergence of the Covid-19 pandemic has brought them to the forefront. They include the capacity of municipal water utilities to off-take water, the end-user tariffs, the interface between up- and downstream, the value for money, and the coordination among key stakeholders. The issues and challenges are not exhaustive but can represent current critical problems in Indonesia’s PPP water supply projects. This chapter offers possible directions for future efforts to deal with the issues.
Andreas Wibowo
Influence of PPP Transportation Projects on Socio-Economic Development in Thailand and Impact of COVID-19 on PPP Projects
Abstract
Thailand has a long history of employing Public-Private Partnerships (PPPs) as a way to finance its economic infrastructure. Most of the PPP transportation projects in Thailand are still concentrated in Bangkok metropolitan areas because of high demand for the services, thereby making them less exposed to market risks. This study investigates the impacts of PPP transportation projects on the socio-economy and financial impacts of the COVID-19 pandemic on existing PPP transportation projects in Thailand. Four projects of two types were chosen as the case study: (1) two mass rail transit systems and (2) two tollways. The study found that the impacts of PPP transportation infrastructure, especially mass rail transits, on the economy and quality of life in Bangkok were evidently confirmed. However, considering the ongoing spread of the COVID-19, this chapter also exposes the vulnerability of PPP contracts and the seemingly innovative financing and risk management tools such as an infrastructure fund (IFF) in which market risks such as demand and revenue uncertainty are transferred to retail and institutional investors. The results of the case study analysis presented in this chapter could be useful for policy makers responsible for improving PPP environment in their own country.
Nakhon Kokkaew
PPP State-of-the-Art in Turkey During COVID-19 Outbreak: Evidence from a Transportation Project
Abstract
The COVID-19 pandemic had a significant impact on construction projects with respect to project success factors such as time, cost, and safety. Due to their unique characteristic of involvement of several national and international public and private parties, public-private partnership (PPP) projects were also considerably affected. This study examined the impacts of COVID-19 pandemic on a build-operate-transfer (BOT) project in Turkey, “1915 Çanakkale Bridge and Highway,” which has been at the construction phase during the pandemic outbreak. Three semi-structured interviews were conducted with (i) a representative of a contractor firm, (ii) a subcontractor firm, and (iii) a group of occupational health and safety (OHS) officials of the consortium. Measures taken and the major impacts of the pandemic have been discussed with the participants, which enabled the comprehension of the context from various perspectives. The findings showed that the project parties quickly adapted to the pandemic requirements at the very early stages of the outbreak, even before the first official announcement on COVID-19 cases in Turkey. The measures were mainly similar in many of the projects in the country (such as cleaning up, disinfections, brochures, tele-commuting, social distancing). However, stricter measures were adopted in the case project (particularly related to site entrance and exit) compared to projects procured through traditional delivery methods. This study explains how the risks due to COVID-19 were handled in a mega project procured through BOT model and presents the lessons learned from a case study.
Asli Pelin Gurgun, Kerim Koc, Güzin Akyıldız Alçura, Mustafa Gürsoy

PPP Stakeholder Management

Frontmatter
Stakeholder Management for Public-Private Partnership (PPP) Hospital Projects in Australia During the COVID-19 Pandemic
Abstract
The COVID-19 pandemic is a highly contagious disease and has spread across the globe at an unprecedented rate. Countries have implemented international travel bans and ordered mass lockdowns to reduce its transmission. This has led to significant disruptions in trade, production, and supply chains, and as a result, negatively impacted the economic performance of various global and national sectors, including the construction sector in Australia. PPP projects have been under considerable stress due to the risks and uncertainties in the market and the enforcement of restrictions that affected the effective management and engagement of key stakeholders of a PPP project. This chapter uses a case study to explore how changes were made to stakeholder management strategies and the online interactive tools that were implemented in a PPP hospital project in Melbourne, Australia, during the COVID-19 pandemic. The hospital was adept in its shift to a virtual and online environment in reaching out to the various stakeholders. It was learnt that flexibility is vital for effective consultation with user groups such as clinicians.
Sajani Jayasuriya, Pauline Teo, Roshani Palliyaguru, Rebecca Yang

Renegotiation

Frontmatter
Effects of Disruption Circumstances on Contract Renegotiation of Australian PPPs
Abstract
The COVID-19 pandemic has had a significant and substantial impact on public–private partnership (PPP) projects. The prevention and control measures taken due to the pandemic may lead not only to the government’s inability to meet its obligations, but also to a significant increase in the costs of the project company or even shutdown. The sudden and continuous impacts will trigger the renegotiation and negotiation mechanisms of PPP contracts. This chapter introduces the market development of PPP in Australia, the impact of COVID-19 on the Australian economy and construction projects and the measures taken by the government and relevant departments to control the pandemic. The government guarantee is taken as an example to analyse the contract renegotiation of a PPP rental retirement village project. The impact of COVID-19 on the project is mainly reflected in a rise in operating costs and a decrease in income caused by a decline in occupancy rate. The results show that the decrease in occupancy rate has had a greater impact on the government guarantee cost than the increase in operating costs and will affect the process of contract renegotiation. The government’s investment decision in the project financing stage will also affect the option value of the project and its own guarantee cost. It is necessary to clearly state the special conditions for renegotiation and to reach agreement on the responsibilities and obligations of stakeholders.
Shijing Liu, Anthony Mills, Chunlu Liu
Implications and Feasibility of Contract Renegotiations of PPP in France
Abstract
A public-private partnership (PPP) is a contract in which one of the partners is the State or a public entity and the other a private operator, the purpose of which is to carry out an infrastructure project for public service purposes (motorways, hospitals, public buildings). The PPP is thus by nature exposed to contingencies due to the possible adoption by the State of measures of general interest that may have an impact on the financial balance of the contract. In addition, there are external contingencies, such as the COVID-19 pandemic, which led to the adoption of containment measures and travel restrictions by States, particularly in France, to protect the health of the population. These measures have had an impact on contracts, in general, and on PPPs, both in terms of their signing and their implementation. Adapting a contract such as a PPP to COVID-19 requires a multiple approach: firstly, to determine the applicable rules of law in force, which implies taking into account on the one hand the particularity of French law which distinguishes between civil law and administrative law, the latter being competent for PPP, and on the other hand the specificity of the regulation applicable to PPP in particular when it exists, and last but not least the distinction between legal concepts applicable in case of change of circumstances, imprévision, and force majeure, with specific legal regimes (conditions of implementation, and impact on the contract) as admitted by French administrative law which differ from the same concepts accepted in French civil law.
Pascale Accaoui Lorfing
Conclusion
Abstract
In December 2019, the Covid-19 pandemic has thrown life out of gear across the world. While writing this chapter, the world has experienced waves of Covid-19 infections, and threats of new virus mutations and deadlier infections still loom at large. As the infrastructure is an underlying fabric, like veins and blood in a human body, on which society and nation prospers, like human body, it too got disrupted owing to Covid-19. This disruption has forced the policy makers and stakeholders associated with the infrastructure delivery process to rethink the entire value chain of right from planning, design, construction to operation of created facility. The extent of “disruption” became a point of debate owing to perception about the “infrastructure” that it is created by keeping in mind the long horizon (of time) and it is expected to have resilience, adaptability, agility, and responsiveness built it in. Few stakeholders termed it as a “black swan event” and tried to discuss it under the cloud of “uncertainty” and “one of off” phenomena. However, many stakeholders kept themselves away from coining Covid-19 as “Unknown” event because human civilization has experienced pandemics in the past and opened healthy debates on how the infrastructure delivery process responded in the times of Covid-19 and what are the areas of improvements to be made in the process to deal with disruptions of similar nature. The infrastructure is shaped and delivered to the customers under the influence of and interaction with varied elements like infrastructure policies, laws and regulations, contractual agreement, design drivers, financing mechanisms, and community consultation process. As each country has a different set of elements in force, the quality and quantity of emergent infrastructure and the service delivered are different. The Covid-19 pandemic unearthed these facets of infrastructure, especially in the delivery of healthcare services. Even it may be apt to say that the Covid-19 pandemic opened the can of worms, and debates raged over the process followed for financial allocation of different infrastructure sectors, policy measures undertaken by the governments to address the infrastructure backlog, accessibility of infrastructure to poor and marginalized communities, measures to reduce carbon footprint of existing, and planned infrastructure. Among these issues, the policy makers and news media were keenly observing and scrutinizing the infrastructure which is created and delivered with Public-Private Partnership (PPP) model.
Tharun Dolla, Ganesh Devkar, Boeing Laishram
Metadata
Title
Revisiting Public-Private Partnerships
Editors
Tharun Dolla
Boeing Laishram
Ganesh Devkar
Copyright Year
2023
Electronic ISBN
978-3-031-37015-1
Print ISBN
978-3-031-37014-4
DOI
https://doi.org/10.1007/978-3-031-37015-1