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Auditing Public private partnership

Auditing Public private partnership. H.B. Kramer NCA. PPP in the Netherlands. many different forms bad experiences in the past no lessons learned from other countries (e.g. USA) not always auditing by NCA allowed some big DBFM contracts now. Focus audit.

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Auditing Public private partnership

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  1. Auditing Public private partnership H.B. Kramer NCA

  2. PPP in the Netherlands • many different forms • bad experiences in the past • no lessons learned from other countries (e.g. USA) • not always auditing by NCA allowed • some big DBFM contracts now auditing PPP

  3. Focus audit • Different from NAO: • NCA: focus on the policy of using PPP: Decisionmaking, added value, transparancy, costs, supervision, information to parliament, effects • NAO: management, good practices, coördination of activities, personnel auditing PPP

  4. Focus audit • different focus: different products • explanation: legal setting different, need for consensus with auditee auditing PPP

  5. High Speed train infraprovider (HSL) • casus: part of the European network, track Rotterdam-Belgium. • DBFM-contract, new instruments: • - Public private comparator • - Public sector comparator auditing PPP

  6. HSL • First question: why PPP? • Who decides? On what information? Is that information correct? • What are the advantages of a PPP in this specific case? What is the added value: cheaper? better public performance? public-private chemistry? auditing PPP

  7. Public private comparator • Quick scan: examines financial viability and advantages of PPP over traditional public execution of the project. • (HSL – no delays 99% private sector, versus 97% public sector) • Interesting point: if PPP is more expensive but gives better performance that is an important element in decisionmaking. auditing PPP

  8. Public Private Comparator (PPC) • Reliability of the PPC is not very high • Quick scan but: ‘go - no go’ was / (is always?) made on the basis of the PPC. • Auditing it: try to find out on what facts it is based, who made it, were there drafts? Always look for authentic, original material, gather it yourself. • Look for information on added value and its influence on the decisionmaking. auditing PPP

  9. Public Sector Comparator (PSC) • Benchmark: idea OK • Complex calculation about costs to make by the State over 30 years including Designing, Building, Financing and Maintaining, including (all) the risks of the HSL • All brought back to one figure… • Idea: if tenders are higher: NO PPP!!! auditing PPP

  10. Auditing the PSC • there should be only one PSC… • what is included? what not? • no ‘adjusting’, ‘scope change’ or extra ‘bandwith of risks’ should be added • highly manipulative: if biddings are higher look careful to changes made in the PSC auditing PPP

  11. Audit findings HSL PPP • decision for PPP was made even before the PPC • use of PPC and PSC only to convince parliament (no way back possible without high costs) • the outcome of the PPC and PSC had to be positive auditing PPP

  12. What went wrong with the PSC • biddings were 50-80% higher… • three new/adjusted PSC’s were made: scope change, extra risks added, risk%-changes, bandwith added extra %age, so that in the end PSC was 5% higher than lowest bidder. • 2/3 of the PSC are calculated risks… auditing PPP

  13. What went wrong with the PSC (2) • still uncomparable: %age of quality delivered was different • so called ‘sunk costs’ not added to bidding so advantage was far less than 5-10%, high learning costs • shift from costs from rails to foundation may cost far more • NCA: 1.2% advantage utmost auditing PPP

  14. Other remarks • risks on: integrity; • contract (English contract under Dutch legal system), adjusting contract impossible; • risks remain high for the State (risk allocation essential); • information parliament vs confidentiality negotiations with bidders, how to keep personnel of good quality; • legal risks: depend on object (railway track), discussion on quality one bolt multiplies enormous. auditing PPP

  15. Conclusion • if the added value is calculated in money beware: motives maybe to buy now and pay later. Influence of parliament will be low in the future. Focus audit on calculation. • if the added value is in terms of public service: political decision. Focus audit on implementation • Always look at risk allocation auditing PPP

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