Regenerative PPPs (R+PPP): Designing PPPs that keep delivering

Photo: Misako Kuniya | Flickr Creative Commons

The time is ripe to explore innovative ways to implement PPPs through a synthesis of sustainable and resilient best practices that progressively improve delivery and outperform original expectations.

During my recent travels as a PPP advisor to Europe, the Middle East, and Southeast Asia, I worked closely with public sector leaders who are increasingly focused on procuring a new generation of PPPs that are meaningful, sustainable, resilient, people-focused, and will support their governments’ goals of achieving the Sustainable Development Goals (SDGs).

A government official from the Balkans had a concern about maturing PPPs in his country. Projects that had been launched at the end of communism were reaching the end of their lifetime and would be in a poor state when returned to the government by under-performing private sector partners who had not met their obligations to ensure the operations and maintenance would guarantee the government received back projects in good working order. Additionally, there was concern that if the perception arose that PPPs had resulted in “privatization of profits and nationalization of debts” that the potential for future PPP projects would be jeopardized.

These projects that could stop delivering once handed back to the public sector because of a lack of financial and human capital resources would set the country’s development agenda back—as it could not afford to build new projects and refurbish old ones at the same time.

What was needed were projects that continued delivering.

Against this backdrop of uncertainty about the significance of PPPs and their ability to truly serve the aspirations of the SDGs, donor organizations and international development banks have recommitted to doing PPPs better through extended delivery horizons.

At a recent Center for Strategic International Studies (CSIS) PPP symposium, Hartwig Schafer, World Bank Vice President for Global Themes, participated in a PPP panel session focused on this. His candid support for delivering PPPs more effectively as an economic development tool that also addresses eliminating poverty and boosting shared prosperity is encouraging. I feel this can only be achieved if PPPs continue to deliver beyond their expiry date. Should we not be asking ourselves: why do we design PPP projects that have a limited life expectancy?

Regenerative PPPs

We do not have to deliver static projects with a limited shelf life. Instead, we need to push for what I call “Regenerative PPPs (R+PPPs)” that incorporate resilience and sustainability best practices and operational architecture and design through an approach that focuses on delivering long-lasting PPPs that proactively renew their stated purpose beyond a contract’s lifetime.

To implement R+PPPs, a change of mindset by PPP architects needs to take place. New considerations include:

• Flexible agreements that include clauses that can refocus projects to seamlessly adapt to unanticipated changing circumstances such as economic, political, environmental, and climate change influences.
• The introduction of incentives that encourage the adoption of new innovations and technologies beyond the original design-build stage.
• Developing a best-practice mechanism that constantly recalibrates projects to adapt to potential challenges of technological and facility obsolescence—a real threat as project delivery periods of performance increase in length.
• Use of alternative financial (and refinancing) tools that are promoted by responsible investors interested in delivering projects (both infrastructure and services) that can be sustainably operational beyond their original period of performance.
• Delivering PPPs that are proactively adaptive and produce even better deliverables that were unimaginable under “myopic” insights that existed at the initial project conceptual phase.
• Synthesization of sustainable and resilience practices into a new generation of practices that create the infrastructure (and services) that are regenerative and don’t need to be rebuilt.
• Identifying transparent and competitive procurement procedures that allow exceptionally well performing incumbent operators of PPPs to continue delivering projects if they exceed delivery goals.
• Exploring mechanisms that enhance the regenerative sustainability of projects that are transferred back to the public sector at the end of the contract period of performance.
• Finding ways to appropriately reallocate new risks that emerge as projects evolve over time under a regenerative paradigm.

I believe we are capable of embracing a new development horizon, supported by exponentially evolving human knowledge that can implement PPP-financed infrastructure projects (and services) that can become regenerative and are as long lasting as they have utility.

Detractors may say it is too costly to develop projects with these underlying expectations. I ask, would it not be better to embrace regenerative projects that continue delivering than going back to the drawing board every 30 years to launch a replacement project? There are practical limitations on the lifetime of infrastructure, but there are also opportunities to innovatively extend performance through regenerative approaches.

It seems counterproductive to focus on projects that have a designed-finite lifetime when we can focus on innovative PPP projects that are truly regenerative. The United States would not have the infrastructure crises it currently has if projects that were built 50 years ago incorporated regenerative practices.

Time is running out. Financial and capital resources are scarcer as population and climatic pressures increase. Now is the time to explore PPP delivery mechanisms that regenerate all the building blocks that deliver PPP projects during their lifetimes—and beyond—so we do not fear their contract expiration and the expiration of the facility as well.

The World Bank
David Baxter