Polish experience in PPP project development
The Polish public-private partnership (PPP) market is still growing. From the day the current Polish PPP law went into effect in 2009 to the end of 2017, a total of 506 proceedings were launched to select a private partner, of which more than 117 PPP contracts were signed and implemented. These statistics suggest that despite the relatively large number of projects slated for implementation in the PPP system, only in 25% of the cases was a private partner actually selected.
This leads us to argue that the relatively low number of successful PPP projects is attributable to inadequate project preparation by public bodies, rather than a lack of interest in partnering with private sector companies.
Based on our extensive experience in the field, we recommend taking the following steps to facilitate the successful launch of PPP projects under Poland’s legal framework and market conditions:
- Identification of a social need and how to satisfy it
The recommended first step is to diagnose a social need on the market and develop a preliminary concept on how to satisfy the identified need through a PPP structure. This is where social consultations may prove helpful, especially if the proposed investment project is likely to encounter social protests (e.g. a sewage treatment plan proposed in vicinity of residential areas). This step will enable the public body to remove erroneous assumptions and incorrect implementation strategies in the preliminary phase. In doing so, all conceptual solutions that are unfeasible due to local economic or social conditions will be eliminated upfront and not become hindrances later on.
- Appointment of the implementation team
To enhance the quality of project preparation, the public entity should appoint an implementation team charged with comprehensive project management of all phases: project definition, project development, selection of a private partner and monitoring the implementation of an executed PPP contract.
It is good practice for the team to include among others: a person responsible for the finances of the public entity, a person responsible for project completion, an expert in the field of public procurement and an expert in the specific area of the given project.
- Engagement of external consultants
The statistics show that only 15% of PPP procedures launched in Poland led to the signing of a PPP contract, whereas nearly 70% were cancelled. This explains why it is highly recommended to hire experienced consultants. External consultants will provide additional support for the implementation team, using their experience, as they are able to reliably assess the needs and expectations of private sector companies and to offer an objective assessment of the concepts proposed by the public body.
- Feasibility studies
To be able to effectively and comprehensively assess whether the PPP model is suitable for a given project, a thorough feasibility study is an absolute necessity.
- Market tests
The recommended initial phase of the analytical process performed on a PPP project is to run market tests. Practice suggests that tests have a pivotal impact on the chances of success of a PPP project, because they bring the concept adopted by the public entity face-to-face with the PPP market players, i.e. private partners and financial institutions. In PPP project implementation practice in Poland, the tests usually take either the form of mailing an information memorandum to targeted private partners, including a survey questionnaire, or the form of direct meetings. Meetings with every entity invited to take part in the market test should have the same agenda and cover the same scope of issues.
- Comparing the PPP project concept with the concept of project implementation in a model assuming no participation of private partners
Once the market consultations have been completed, the next phase of the analytical process should involve preparing a comparison between delivery under a PPP formula for the project (additionally verified in the course of market consultations) and delivery under a traditional model (i.e. without a private partner) to demonstrate the potential advantages of a PPP project in terms of feasible economic benefits. Industry yardsticks are used to gauge the effectiveness of the PPP model (e.g. the “Public Sector Comparator” known as the “PSC”). This process will determine whether the project goals ought to and can be achieved in a team effort with a private partner in a manner that provides greater benefit to the public body than the traditional project delivery model.
Solid preparation of a PPP project undoubtedly has a decisive impact on overall project success. Errors made in the preliminary phase are difficult to remedy at the stage of selecting a private partner and are the most frequent cause of aborted projects. To sum up: the better you prepare a project, the more likely you are to succeed.
In case of any questions – please do not hesitate to contact the authors directly:
Tomasz Korczyński firstname.lastname@example.org
Bartosz Mysiorski email@example.com
Michał Liżewski firstname.lastname@example.org