PPP Centre overview

Public-Private Partnership Centre of Vnesheconombank is an independent unit within the structure of the Bank. It was created to advance PPP business in the Bank’s portfolio. The strategy of the Bank assumes that in 2012 PPP projects will account for one third of its credit portfolio. In absolute figures it will be about 2.5 billion USD a year. Given the role of the Bank as a national development institution, the Centre is well positioned to serve as a national leader in PPP practice. Eventually, its mission is to create a PPP market in Russia.

Mission

The Centre mission is to ensure support and accelerate development of federal, regional or municipal infrastructure projects and enhance quality of public services through the application of a range of PPP instruments.

What is a PPP to the Centre?

While PPP may have very broad general meanings, the Centre would focus on a very specific area of activities. For us, public-private partnership (PPP) refers to contractual arrangements formed between a public agency and a private sector entity to engage private sector’s contribution to more efficient and effective (than solely public) delivery of public sector related objectives on the basis of division of responsibilities, risk allocation, and cost compensation. PPPs may be initiated by a public sector only.

Within the current Russian legislative framework, the way we see it, PPP projects may…

  • … be designed for construction (reconstruction, modernization, production, spinning capital cost off the budget) of capital investment assets for the benefit of the public interest within the scope of the regional, urban or industrial development strategy or other strategy to improve public services;
  • … be financed by private sources, which can be reimbursed by proceeds from a commercial operation of an asset by a private partner (when the facility is operated by a public agency) or on a fee for services basis, lease fee or instalment payments;
  • … be implemented by providing private capital and expertise and allocating it partially or fully with the risks of design, construction, operation and maintenance, and sales;
  • … be secured with limited recourse to public funds and assets subject to legal and regulatory arrangements to share project risks related to public competence.

Since public demand originates PPP projects, we see the role of public procurement of a project to be the only venue to establish PPPs. It forms a project, makes public responsibilities within the PPP framework legitimate and enforceable, and establishes public policies and mechanisms to ensure project implementation on the public side. PPP project procurement includes several stages where special competences, not otherwise normally present in the public administration, may be required. Among them are:

  • Support for strategic analysis to select PPP instruments to implement industrial, regional or urban development objectives. It is based on the comparative feasibility study of budget and macro economic efficiency of project delivery procuring the services of a private partner;
  • Support for tender preparation of a project, including:
    • setting up efficiency objectives and quality criteria the private partner is to meet;
    • devising legal model of the project, including a contract and other relevant agreements and/or legal authorities’ decrees and resolutions and/or other regulatory documents related to contractual obligations of the public side;
    • developing a project communications package that would equip a potential partner with the information needed to participate in the tender;
    • devising a tender procedure;
    • consulting with potential private partners on the relevant issues.
  • Support for adopting a decision on project delivery by the respective public bodies;
  • Support for solicitation of bidders, negotiation support with selected winners, negotiation support to facilitate financial agreements on the project.