Public-Private PartnershipBangladesh Perspective Presented By: Mohammad Zakir Hossain Deputy Comptroller and Auditor General Office of the Comptroller and Auditor General of Bangladesh
Public-Private Partnership (PPP) • PPP is a contractual agreement formed between a public agency and private sector entity • PPP allows greater private sector participation in the delivery of services • PPP allows the public agencies to tap private sector technical, management and financial resources to achieve certain public agency objectives such as • greater cost and schedule certainty, • supplementing in-house staff, • innovative technology applications, • specialized expertise or access to private capital.
Reasons for Public-Private Partnership • Accelerating the implementation of high priority projects by packaging and procuring services in new ways • Turning to the private sector to provide specialized management capacity for large and complex programs; • Enabling the delivery of new technology developed by private entities; • Drawing on private sector expertise in accessing and organizing the widest range of private sector financial resources; • Encouraging private entrepreneurial development, ownership, and operation of related assets; • Allowing for the reduction in the size of the public agency and the substitution of private sector resources and personnel.
Key Benefits of Public-Private Partnership PPP provides benefits by allocating the responsibilities to the party – either public or private – that is best positioned to control the activity that will produce the desired result • The primary benefits of using PPP to deliver services include: • Expedited completion compared to conventional delivery methods • Cost savings • Improved quality and system performance from the use of innovative materials and management techniques • Substitution of private resources and personnel for constrained public resources and • Access to new sources of private capital.
How are risks and rewards allocated in public-private partnership • Risks are allocated to the party that is the best equipped to manage them • PPP contracts often include incentives that reward private partners for mitigating risk factors
Promoting Public-Private Partnership in Bangladesh • Fast changing policy situation with globalization and deregulation recognizes increasingly important role of private sector in Bangladesh • Bangladesh has a very rich experience on PPP, especially in respect of the scope and diversity of Non-Government Organization (NGO) activities in social services
Sectors of PPP in Bangladesh • Health Sector • Education Sector • Infrastructure Development • Tourism Sector • ICT Sector • Industries
Premises of PPP in Health and Education Sector • PPP in health and education sectors are based upon three premises: • Health and education are critical areas of activity for national development • The “public good” character of health and education and the scale of effort required to meet society’s needs in these two areas call for close cooperation of all stakeholders in both public and private sectors • The current status and future prospects of PPP are contingent upon country specific circumstances.
The Spectrum of Relationship in PPP • Parallel activities: Public and private activities are carried out without any contact with each other or acknowledgement of the existence of each other • Competitive activities: The activities in the public and private sectors are carried out with same or similar objectives, targeting common clientele and competing with each other, which may mean either wasteful duplication of activities or enlargement of choices for the beneficiaries.
The Spectrum of Relationship in PPP(Contd.) • Complementary activities: Activities or services from the public and the private sectors complement each other in terms of nature and content of services or geographical and population coverage, either by design or incidentally • Contractual services: The government contracts private sector for providing specified services for agreed fees, with the contractor being accountable to the government authority.
The Spectrum of Relationship in PPP(Contd.) • Cooperation and collaboration: Public and private actors work together on the basis of shared objectives, strategies and agreed criteria regarding assessing process and outcome; the partners also cooperate in developing common objectives and strategies and criteria for assessment of activities.
Who are the Partners Public Sector Partners • National government • District administration • Municipal authorities • Local government bodies • Para-statal corporations • State universities and research organizations
Who are the Partners (Contd.) Private Sector Partners • Commercial for-profit enterprises • Development-focused voluntary non-governmental organizations (NGOs) • Cooperative societies • Community-based organizations • Religious organizations • Professional organizations • Trade unions • Research and academic institutions • Households
Judging Effective Partnership • The principles of “non-rivalry” and “non-exclusion” of public goods logically point to the criteria of universality and equity in judging the value of partnership • Given the competing demands on scarce resources in developing countries, efficiency in terms of optimal benefits from a given cost must be an important criterion • Accountability to various stakeholders regarding objectives, process and outcome in basic social services also is a key consideration • In other words, • universality • equity • efficiency and • accountability of basic services are the four sets of criteria for judging the design and the results of partnership
Criteria for Judging Effective PPP (Contd.) • Universality • refers to access for all who are eligible to a type of service; for example, universal primary education for all children in the primary-school age group • Equity • is an elaboration of the universality criterion in terms of ensuring acceptable quality of service for all; sharing of costs equitably when a cost is necessary to be imposed; and special attention to groups disadvantaged due to historical, economic or cultural reasons • Efficiency • has two aspects. Internal efficiency in terms of operations and management of an activity to achieve maximum output for the least cost; and external efficiency in terms of achieving best results in terms of objectives of the activity for the least cost • Accountability • refers to holding the providers of services answerable to the beneficiaries and other stakeholders regarding both process and outcome of a program. Openness and transparency in management and a participatory approach in planning, making key decisions, and evaluation are necessary conditions for accountability
Key Features or Findings of Case Studies of Non-Government Involvement in Bangladesh
In the Health Sector of Bangladesh the following key features of the partnership identified: • In the total national effort to provide for health services, the government is a minor actor in terms of the total health expenditures and peoples’ utilization of services, contrary to general impressions • It is evident that non-governmental organizations active in health and family planning have been engaged in: • a major collaborative relationship with the public sector services; or • have run their own complementary programs.
Key features of partnership (Contd.) • In case of public sector health care and family planning services: • their quality does not generally meet a minimum acceptable standard; • they have widespread reputation of mismanagement, corruption, inefficiency, and of being devoid of a friendly service-provider attitude • the public facilities are utilized considerably below their expected capacity.
Key features of partnership (Contd.) • Preventive and basic curative care provided by NGOs are generally regarded as: • more effective • more client-friendly and • utilized more frequently than public facilities • The private sector service providers in health account for three-quarters of all health sector expenditures
Key features of partnership (Contd.) • There is no substitute for a strong public sector role in setting policies and priorities for the nation • Effective protection of public interest demands that the large and important role of NGOs, households and the other actors are recognized • that they are taken into account in maintaining an overview of the sector by the government and in guiding policies and priorities; and • that the policy and regulatory environment is created for all actors to play their collaborative, complementary, parallel or competitive role
Public-Private Partnership and SAI Bangladesh • The audit mandate of the SAI Bangladesh with regard to audit of PPP is clear. All PPP, where the government has a majority interest are within the purview of audit of SAI Bangladesh • The formidable task in this audit is the minimization of risks, which is achieved through comprehensive audit plan • The SAI is very careful in assessing the capacities of the private sectors in delivering the “public goods” through partnership • A public-private partnership within the SAI itself in terms of cooperation with the professional accounting bodies and hiring of private sector experts is also being contemplated in this type of audit