Saturday, December 26, 2015

Sports Hub Partnership

Someone knowledgeable about the subject explained to me the difference between a PPP (public private partnership)  and a normal procurement process.

Public private partnership
An example of the PPP is the Sprts Hub. It involves several parties, namely
a) The public sector
b) The financiers, who are mainly the banks
c) The builder
d) The facility manager
e) The operator, who is responsible to bring in the international events

All of these parties have an interest in the PPP and are expected to work in the best interest of the PPP (at least in theory).

The public sector, which will eventually own the property at the end of 25 years will make an annual payment based on the KPIs that have to be achieved by the PPP.

The disadvantage of the PPP is the difficulty in getting decisions made. As many parties are involved, it is difficult to manage the different priority of interest of these parties.

This is why the PPP involving the Sports Hub has to face many problems and challenges.

Normal Procurement
Under the normal procurement method, a company will be set up to be the equity owners of the project. They will negotiate for financing with the banks on commercial terms. They will get a builder to build the project for an agreed price. It could be a design and build project. They can appoint the operator to manage the facility and bring in the events.

From this explanation, it is quite clear the normal procurement is a straight forward arrangement. It was rather naive for the government to go into the PPP which brings along so many unnecessary problems that have to be handled.

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