PUBLIC PRIVATE PARTNERSHIP MANUAL - GTAC

1 PUBLIC PRIVATE PARTNERSHIP MANUALNATIONALTREASURYN ational Treasury PPP Practice Notes issued in terms of thePublic Finance Management Act Main Intro+Contents 7/16/04 5:14 PM Page 1 PREFACES outh Africa is proudly amongst the leading countries in the world in the law, policy and systems we have established for PUBLIC PRIVATE partnerships. Ourpublic service delivery record has been enriched through PPPs in recent years,and our PPP project pipeline continues to grow, both in numbers and in theinnovative value-for-money solutions it Treasury s PPP Manualis indeed a world first.

2 It systematically guidespublic and PRIVATE parties through the phases of the regulated PPP project cyclefor national and provincial government, unpacking policy and providingprocedural clarity as it does so. It draws on South African project experience todate and on best international practice, without infringing on the authority ofaccounting officers and authorities. It sets rigorous risk-assessment standardsby which government will make affordable project choices that best lever-age PRIVATE investment for quality PUBLIC services.

3 Importantly, the PPP Manualcontains a code that will go a long way to achieving broad-based blackeconomic empowerment in PPPs, not only in the equity and management of thecontracted PRIVATE parties, but in their subcontracting and in the projects localsocio-economic impacts. Together with Standardised PPP Provisions, the PPP Manualis a powerful toolin South Africa s ongoing quest to tackle poverty and grow our economy. Wherethe transfer of financial and operating risk to a PRIVATE partner through a PPPgives us an affordable, cost-effective solution for a service, we will pursue it.

4 Wewill continue to learn as we go forward, mindful of the opportunities that PPPspresent to galvanise the commitment that drives such a wide range of SouthAfricans to play a meaningful role in our unique development A Manuel, MPMinister of FinanceI Main Intro+Contents 7/16/04 5:14 PM Page III Main Intro+Contents 7/16/04 5:14 PM Page IICONTENTSABOUT THE PPP MANUAL MODULE 1: SOUTH AFRICAN REGULATIONS FOR PPPsIntroduction1 Understanding Treasury Regulation 163 Annexure15 MODULE 2: CODE OF GOOD PRACTICE FOR BEE IN PPPsDefinitions1 Preamble4 Part I51.

5 Policy on BEE in PPPs52. Legal basis for PPP BEE policy73. Why PPPs are good for BEE74. Challenges for BEE in PPPs8 Part II: How to apply PPP BEE policy in the typical structure of a PPP9 Part III: How to apply PPP BEE policy in each phase of the PPP project cycle16 Part IV: The PPP BEE Balanced Scorecards27 Part V: Government s further commitments to taking BEE in PPPs forward28 MODULE 3: PPP INCEPTIONF irst steps2 Attracting the transaction advisor9 Receiving and evaluating bids24 Finalising and signing the contract31 Funding for transaction advisors through the PDF32 Annexures43 MODULE 4.

6 PPP FEASIBILITY STUDYI ntroduction1 Stage 1: The needs analysis3 Stage 2: The solution options analysis9 Stage 3: Project due diligence14 Stage 4: Value assessment17 Stage 5: Economic valuation40 III Main Intro+Contents 7/16/04 5:14 PM Page IIIS tage 6: Procurement plan41 Stage 7: Submit the feasibility study report42 Stage 8: Revisiting the feasibility study45 Annexures47 MODULE 5: PPP PROCUREMENTI ntroduction1 Links to the feasibility study4 Critical considerations in the procurement phase9 Stage 1: The RFQ19 Stage 2: The RFP26 Stage 3: Choose the preferred bidder42 Stage 4: Negotiations59 Stage 5: TA:III62 Stage 6: Close-out report and case study65 Annexures71 MODULE 6: MANAGING THE PPP AGREEMENTS ection 1: What is PPP agreement management?

7 1 Section 2: The institution s roles and responsibilities6 Section 3: The approach to PPP agreement management11 Section 4: PARTNERSHIP management13 Section 5: Service delivery management20 Section 6: PPP agreement administration29 Section 7: Key challenges and tasks of PPP agreement management33 Section 8: The PPP agreement management planand the PPP agreement management manual37 MODULE 7: AUDITING PPPsIntroduction1 The Auditor-General2 Internal Audit9 Annexures11 MODULE 8: ACCOUNTING TREATMENT FOR PPPs(To be inserted)MODULE 9: AN INTRODUCTION TO PROJECT FINANCE(To be inserted)IV Main Intro+Contents 7/16/04 5:14 PM Page IVABOUT THE PPP MANUALThe South African National Treasury s PPP Manualis a best practice guide forPPP practitioners.

8 Each module of the PPP Manualis issued as a NationalTreasury PPP Practice Note in terms of the PUBLIC Finance Management Act,1999 (PFMA). It should be read with Standardised PPP Provisions, issued asNational Treasury PPP Practice Note Number 01 of PPP project cycleThe PPP project cycle is the roadmap for the PPP process and the project cycle covers the two main periods of a PPP: the Preparation Periodand the Project Term. The PPP Preparation Period spans phases I to III of theproject cycle: Inception, Feasibility Study and Procurement, and concludeswith the signing of the PPP agreement.

9 The Project Term spans phases IV toVI: Development, Delivery and Treasury s PPP Manualis chiefly concerned with the Project Prepa-ration period, during which treasury approvals I, IIA, IIB and III are granted. ThePPP project cycle clearly indicates when these approvals are required andwhich modules of the PPP Manualare relevant for the distinct PPP Manualalso gives guidance on managing a PPP agreement, auditingPPPs, accounting treatment for PPPs, and project modulesModule 1: South African Regulations for PPPs(issued as National Treasury PPP Practice Note Number 02 of 2004)Regulation 16 to the PUBLIC Finance Management Act, 1999 (PFMA) is theregulation governing PPPs in South Africa.

10 This module takes the user throughthe components of the regulation and explains how they apply to the distinctphases of the PPP project cycle, from inception to the management of the PPPagreement. Regulation 16 is reproduced in Annexure 1. The relevant section ofthe regulation is also included at the beginning of each 2: Code of Good Practice for BEE in PPPs(issued as National Treasury PPP Practice Note Number 03 of 2004)This module is an exact reproduction of the Code, National Treasury s officialframework for black economic empowerment (BEE) in PPPs, to be issued interms of the Broad-based Black Economic Empowerment Act, 2003 (BBBEEV Main Intro+Contents 7/16/04 5:14 PM Page VAct).