Module 10: Establishing Partnership Processes

10.2 Who is involved?

• Public sector
• Private sector
• Community

PPP brings together three broad categories of partners: the public and private sectors and the community (or private, not-for-profit sector). Each type of organisation brings along some processes it “always” uses [see also Tool 10-1]. Understating these processes helps to avoid many misunderstandings in the process of building a partnership.

A. Public sector – government processes

The two processes that govern the public sector’s role in the PPP are: regulation and procurement/contracting.
Regulation is designed to set and apply standards of performance. For this, the government uses instruments such as licensing; subsidies; performance standards; property rights; price, rate and quantity restrictions; and so on [see Tool 15].
Contracting/procurement is the arrangement made by government whereby it pays other parties to provide a good or service. In order to avoid corruption problems, the rules of the public procurement are very strict and are designed to ensure transparency and that the government pays the lowest price for requested service [see Tool 16].

B. Private sector – due diligence

Due diligence is an important process for the private sector. This term reflects the necessity of the private partner’s assessment of the past performance, reputation and future plans of a prospective alliance partner with regard to its various business practices and principles. The purpose of due diligence is to evaluate whether the project is attractive enough for the private partner to take on the risks involved.

The due diligence process must identify, in advance: a planned schedule of events; processes to be followed; activities to be carried out; considerations; evaluation criteria and so on. For all projects, a comprehensive “reference case” must also be developed independently and in advance of the evaluation process. This must be used in the evaluation process, which must be transparent and objective.

A good process with regard to due diligence requires significant resources. The size of the project does not influence the extent of the due diligence significantly. Thus, the share of the due diligence-attributed transaction costs will be higher for smaller projects.
Because the process of due diligence is such an important part of private sector involvement, it often makes inexperienced government bodies uneasy when they have to become part of it.

C. Community – participatory decision-making

Participatory decision-making is a process which broadly characterises the way the public can affect the decisions taken by government. Public participation is not a monolithic concept. There are general and specific methods through which the public can have a voice in the decision-making process. These methods include comments, testimonials, lawsuits, publicity campaigns and protests, among others.

Besides the fact that the public has the right to know, to express its opinion and to affect decisions, the government should realise that involving civil society in the PPP building process will influence the sustainability and efficiency of the PPP itself. The government needs to envision the community participation that there will be in decision-making processes such as: development of policies, legislation, standards; issuance of permits; planning decisions; privatisation awards; enforcement of laws and so on.

The participatory process also has implications for the processes typical of the other two sectors. For the government, it means a grassroots-up approach to decision-making and the presence of a watchdog, which provides an additional level of corruption control. For the private player, it implies that its customers will have better knowledge of the services they pay for, as well as the presence of monitoring for fair (rather than excessive) profits.

Processes used by the three sectors differ to such an extent that those actors inexperienced in partnerships might be anxious at least, if not discouraged altogether from the consequent activities. What needs to be kept in mind is that in order to achieve the results expected from the PPP, each of the players will not only have to show tolerance and mutual respect, but will also have to adapt themselves to understanding the other party’s formal processes.

[click here to proceed to Tool 10-1: Processes brought to the table by possible partners]

© 2004 UNDP,  Manufactured by Margraf Publishers GmbH, Germany