Global Investment in Public Private Partnerships

Investment in Public Private Partnership (PPP) infrastructure projects is now commonplace in the UK and is on the rise in the Greece and Latin America. This can be seen as a reflection of the growing acceptance, globally, of the benefits that properly structured PPPs can offer says Santiago Klein, International Director at McBains Cooper 

PPPs offer an efficient alternative to build, operate and maintain infrastructure projects. This is evidenced throughout Latin America in particular, where PPPs have been extensively embraced with more than one hundred billion US dollars of investment currently being pumped into Mexico, Colombia, Peru and Chile.

PPPs also have a crucial role to play in maintaining and enhancing existing services. As governments struggle to find funding from the public purse, partnerships between the public and private sector may prove to be an alternative mechanism available to maintain high quality standards in public services, by bringing in new private investment, innovation and management expertise.

And in the UK, already home to the most mature PPP market in the world, it is forecast that recently revised PPP models set out by the government will provide a new vigour to the construction pipeline.

It is interesting to note that even countries facing an economic crisis are looking towards PPP to maintain quality standards in public services.  Despite Greece’s fragile landscape, the PPP procurement route is seen as a way forward in procuring public sector projects and reviving the construction industry.

Santiago Klein

Partnerships such as this enable the public sector to benefit from commercial dynamism and efficiencies, harnessed through the introduction of private sector investors who contribute their own capital, skills and experience. In this sense, PPPs also breeds innovation and a culture of best value.  Its framework enables a more holistic approach, whereby cost is considered alongside other values, such as welfare or sustainability. As these factors become more important to both investors and the industry, the use of PPPs mean they become more accessible, as they are offset against savings from improved efficiencies or enabled by payback from long term funding.

The Mexican Prisons PPP programme is a perfect example of this. An ambitious and politically sensitive project, it benefited from a specialist advisory approach that utilised UK expertise to assist the Latin American country in rethinking its public policies.

McBains Cooper helped the Mexican Ministry of Public Security to develop a PPP model as the most appropriate procurement route for its prison programme, aligned with the government’s philosophy on the prison system as one of rehabilitation and re-entry of inmates into the society.

In addition to the social requirements of the programme, McBains Cooper’s role as technical advisor needed to ensure that the resultant prisons were fit for purpose buildings designed to modern standards in compliance with Mexican official regulations, the rules of the American Correctional Association, international human rights regulations and international standards.

Extensive sustainability experience also ensured that the prison designs created the most carbon neutral buildings that the programme and security needs would allow.  This has also meant that significant savings on maintenance can be expected over the whole building’s life-cycle.

In fact, sustainability will no doubt become a key driver of PPP, as its mechanism more easily facilitates the sometimes heavy upfront investment required in those green technologies that will provide a significant payback over the longer term.

The landmark building for the Gloucestershire Constabulary PFI Project is a case in point. The Police Authority sought a low carbon emissions solution to their new headquarters building and McBains Cooper devised an optimum solution to the sustainable energy objectives by using a geothermal heat pump installation to meet both the building’s heating and cooling needs throughout the year.

The first major ground source system to be installed in the UK, McBains Cooper was able to justify the upfront investment from the forecast energy saving.  Other ‘green’ measures included rainwater recovery, solar shading, high thermal performance building fabric and building orientation – and after the first year of operation, the combined savings were calculated as a 36% saving in fuel costs over traditional buildings without geothermal.

Whether based in the UK, Greece, Colombia or Mexico one thing is clear; PPPs require a robust approach to achieve a project that is fit for use, delivers true value for money and is financially viable in the long term. The development of a PPP involves a multitude of interlinked facets: A true understanding of the impact of design, construction schedules, building and facilities management overlaid by the principles of sustainability and an in-depth local knowledge which is required to ascertain and allocate risk.

An interdisciplinary practice, such as McBains Cooper, can harness the right people with the right skills appropriate to the tasks and specialisms, meaning they are adept at understanding, identifying and mitigating risk for clients – whether acting for the public or private sector – to ensure their investment in a PPP project is safe, whatever challenges might arise.

Investors should be looking to companies such as McBains Cooper to focus on ensuring their project reflects market expectations, thereby supporting bankability and ensuring financing can be secured.

When considering the construction phase of a PPP project, McBains Cooper also works to ensure a project is ultimately delivered within the timeframes allotted by using a variation of KPIs and payment mechanisms such as ensuring sufficient time periods built into the concession agreement and reasonable measures to tackle poor performance are incorporated.

When looking at the operation and maintenance phase of the concession, McBains Cooper advises on value engineering measures and environmental specification, to deliver not only efficiencies in the build phases but also in the longer term operational efficiencies of the building.

By applying its extensive experience of working within this type of concession in the UK, McBains Cooper is positioned as an international partner in the adoption and delivery of PPP projects in other parts of the world. In countries such as Mexico, Colombia, Peru, Brazil and Chile PPP procured projects and programmes are creating new opportunities for investors and ultimately encouraging the transparency, efficiency and reliability of much-needed infrastructure development.

For further information visit www.mcbainscooper.com or call +44 (0) 20 77867900.