Guidelines for

Public-Private Partnerships
 Guidelines for
Public-Private Partnerships

Department of Finance

Republic of South Africa

April 2000
ISBN: 0-621-29944-8

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PREFACE

The government alone cannot meet South Africa’s development challenge. To generate economic
growth, provide infrastructure and deliver services, the government and private sector must
combine their different strengths, providing a supportive policy and regulatory environment,
entrepreneurial innovation, specialist skills and all the other qualities that make a modern economy
competitive.
To stimulate such partnerships, the Cabinet adopted a policy (Strategic Framework for Delivering
Public Services through Public-Private Partnerships) and a set of regulatory principles that form
the basis for the Treasury Regulations in terms of the Public Finance Management Act. The
Guidelines for Public-Private Partnerships aim to assist departments in implementing this policy
and legislation in their management of public-private partnerships (PPPs).
PPPs are, of course, not run-of-the-mill public administration. They pose new challenges to
government officials and their non-government partners. Exceptional management and complex
negotiation are required to ensure that the public good is served through the right mix of risk
transfer and value for money at a price the government can afford.
The Regulations and Guidelines deliberately avoid bureaucracy, keeping the Treasury’s role to a
minimum and entrusting the relevant line departments with technical and managerial
accountability. Accounting officers are expected to ensure that PPP processes are competitive,
transparent and open to public scrutiny, with sufficient safeguards against favouritism, improper
practices and corruption.
The new Treasury Unit on PPPs will build on these Regulations and Guidelines to assist office-
bearers and accounting officers in applying sound principles of governance when considering,
negotiating or monitoring PPPs. We hope to see best practice emerging and dynamic service
provision taking root. The government’s goals of transformation, development and sustainable
service delivery may not depend on this exclusively, but are nonetheless inextricably tied to the
success of the drive for PPPs.

Trevor Manuel
Minister of Finance

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Guidelines for Public-Private Partnerships

CONTENTS
Preface .................................................................................................................................... i
Boxes ...................................................................................................................................... iv
Tables ...................................................................................................................................... iv
Abbreviations ........................................................................................................................... iv

1 Introduction
Aims and objectives of the Guidelines ....................................................................................... 1
The role of the PPP Unit ............................................................................................................ 2
Chapter outline ......................................................................................................................... 2

2 The basic “what” and “why” of public-private partnerships

Introduction .............................................................................................................................. 5
Major “do’s and don’ts” in the Treasury Regulations .................................................................. 5
What is a public-private partnership? ......................................................................................... 5
What is a “departmental function”? ............................................................................................ 6
Types of public-private partnership ............................................................................................ 6
Why use public-private partnerships? ......................................................................................... 7
What is “value for money” in public-private partnerships? .......................................................... 7
What is “affordability” and who determines it? ........................................................................... 7
What is “risk transfer” and why is it important? .......................................................................... 7
Do the Treasury Regulations apply to public-private partnerships in the local government sphere? 8
Conclusion ............................................................................................................................... 8

3 Starting off: identifying projects and selecting a team

Introduction .............................................................................................................................. 9
What the Treasury Regulations say ............................................................................................ 9
What this means in practice ....................................................................................................... 10
The project team ....................................................................................................................... 121
Conclusion ............................................................................................................................... 14

4 Assessing the feasibility of public-private partnership arrangements

Introduction .............................................................................................................................. 15
What the Treasury Regulations say ............................................................................................ 15
When to do feasibility studies .................................................................................................... 16
Using the right skills ................................................................................................................. 16
What to assess .......................................................................................................................... 16
Conclusion ............................................................................................................................... 19

5 Procuring public-private partnerships

Introduction .............................................................................................................................. 21
What the Treasury Regulations say ............................................................................................ 21
Pre-qualification ....................................................................................................................... 21
Developing bid documents ........................................................................................................ 23
Submission and opening of bids ................................................................................................. 24
Evaluating bids ......................................................................................................................... 24
Selecting the preferred bidder .................................................................................................... 25
Concluding the evaluation and negotiating the contract ............................................................... 26
Conclusion ............................................................................................................................... 27

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 Guidelines for Public-Private Partnerships

6 Contracting public-private partnerships

Introduction .............................................................................................................................. 29
What the Treasury Regulations say ............................................................................................ 29
Confirming that the arrangement is affordable and offers value for money .................................... 30
Setting up suitable project implementation arrangements ............................................................. 30
Risk assessment and mitigation .................................................................................................. 31
Typical contract conditions ........................................................................................................ 32
Conclusion ............................................................................................................................... 33

7 Contract management
Introduction .............................................................................................................................. 35
What the Treasury Regulations say ............................................................................................ 35
Institutional arrangements for contract management .................................................................... 35
Monitoring performance ............................................................................................................ 36
Ensuring compliance ................................................................................................................. 36
Resolving disputes and other issues ............................................................................................ 37
Conclusion ............................................................................................................................... 37

8 Post-contract completion evaluation

Introduction .............................................................................................................................. 39
What the Treasury Regulations say ............................................................................................ 39
Key aspects of a post-contract completion evaluation .................................................................. 39
Conclusion ............................................................................................................................... 40

9 Dealing with unsolicited bids

Introduction .............................................................................................................................. 41
What the Treasury Regulations say ............................................................................................ 41
Options for and approaches to the provision of preferences or rewards ......................................... 42
Other matters ............................................................................................................................ 44
Conclusion ............................................................................................................................... 44

10 Conclusion ...................................................................................................................... 45

Bibliography .......................................................................................................................... 47

Annexure I: PPP training products ................................................................................... 49

Annexure II: Draft request for proposals ......................................................................... 71

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Guidelines for Public-Private Partnerships

BOXES
1.1 Phases in the PPP process and outcomes ........................................................................... 3
3.1 Typical PPP objectives .................................................................................................... 10
3.2 Stakeholder consultation .................................................................................................. 12
3.3 An example of a project profile and scope ........................................................................ 12
3.4 Skills requirements .......................................................................................................... 13
4.1 The public sector comparator ........................................................................................... 18
5.1 Outline advertisement inviting pre-qualification ................................................................ 23
5.2 Some useful pointers for bidding documents ..................................................................... 24
5.3 Technical examination of bids .......................................................................................... 25
5.4 Financial evaluation of bids ............................................................................................. 26
6.1 Key risks and contractual mitigation options ..................................................................... 31
6.2 A legal checklist .............................................................................................................. 32
9.1 A simplif ied case study .................................................................................................... 42
10.1 Criteria for assessing a PPP proposal: a checklist ............................................................... 45

TABLES
2.1 Types of PPP contract ..................................................................................................... 6
9.1 Bidder proposals ............................................................................................................. 43
9.2 Adjusted results, Option 1 ................................................................................................ 43

ABBREVIATIONS
BOO build-own-operate
BOT build-operate-transfer
DCD Department of Constitutional Development
DOT Department of Transport
ILO International Labour Office
IP3 Institute for Public-Private Partnerships
JUPMET Joint Universities Public Management Trust
MIIU Municipal Infrastructure Investment Unit
MTEF Medium Term Expenditure Framework
NBI National Business Initiative
NGO non-governmental organisation
NPV net present value
PPP public-private partnership
PSC public sector comparator
RFP request for proposals
RFQ request for qualification
SAMDI South African Management Development Institute
SMME small, medium and microenterprise
USAID United States Agency for International Development

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 1
Introduction
Aims and objectives of the Guidelines
In 1997, the Cabinet approved the appointment of an Interdepartmental Task Team to explore
ways in which to make public-private partnerships (PPPs) a more viable option for performing
selected departmental functions on behalf of national and provincial government departments.
The work programme of the Interdepartmental Task Team comprised six areas:
• An audit of PPP activities in South Africa
• An analysis of possible fiscal impacts
• A preliminary scan of the legal framework
• A consideration of institutional options
• A review of international best practices
• An assessment of organisational capacity to carry out PPPs
The work of the Task Team formed the basis for the government’s three key documents on PPPs –
Strategic Framework for Delivering Public Services through Public-Private Partnerships,
Treasury Regulations and Guidelines for Public-Private Partnerships. The figure below depicts
the purpose of each of these documents.

Strategic Framework

Sets the context

Treasury Regulations

Set minimum requirements

Guidelines

Provide suggestions for managing PPPs

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Guidelines for Public-Private Partnerships

The Strategic Framework addresses key constraints to the successful implementation of PPPs, and
identifies a package of legislative, regulatory and institutional reforms to strengthen the enabling
environment.
The Treasury Regulations, issued in terms of the Public Finance Management Act of 1999 regulate
PPPs in national and provincial government departments to ensure that accounting officers remain
fully accountable for the outcomes of departmental functions performed under PPP arrangements.
The Guidelines contain a set of procedures to advise departmental accounting officers and project
managers on sound practices when preparing, procuring and implementing PPP arrangements.
In short, these Guidelines are intended to:
• assist national and provincial departments in applying the Treasury Regulations
• provide an overview of PPP arrangements – the benefits, reasons, types of PPP and outsourcing
arrangements
• outline the key issues in understanding and implementing PPP projects.

The Guidelines are neither exhaustive nor comprehensive, but are instead a first edition to support
the implementation of the Treasury Regulations. They will be adapted where required, based on
feedback from line departments. Users are therefore encouraged to work with the Treasury to
ensure that the Guidelines remain relevant and appropriate.

The role of the PPP Unit

The national Treasury has set up a dedicated PPP Unit to support the implementation of the
Strategic Framework. It will enforce compliance with the Treasury Regulations and assist
departments in the preparation, procurement and implementation of PPPs. The Unit will provide
technical and financial advice throughout the PPP project cycle, thereby complementing the
information contained in these Guidelines. The Unit’s project management, economic, legal and
financial skills will enable staff to assist departments in project management, economic and
financial analysis, negotiation and legal processes pertaining to PPPs.

Chapter outline
A PPP project life cycle revolves around the sequence of steps outlined in Box 1.1 below. Chapter
2 describes the “what” and “why” of PPPs – how they benefit public service delivery. Chapters 3
to 8 detail the requirements of the Treasury Regulations for each phase and guide departmental
accounting officers in managing these. Chapter 9 provides options for dealing with unsolicited bids
in the context of PPPs. Chapter 10 concludes the Guidelines with a short summary.

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 Chapter 1: Introduction

Box 1.1 Phases in the PPP process and outcomes

Process

Phase I Phase II Phase III Phase IV Phase V Phase VI

Identifying Assessing Procuring Contracting Contract Post-contract
projects and the feasibility PPPs PPPs management evaluation
selecting a o f PPPs
team

Candidates Feasibility PPP service Contract Performance Future

identified, analysis provider signed, monitored options
business confirmed selected transition to and enforced evaluated
case PPP and
prepared provision determined

Outcomes

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 2
The basic “what” and “why” of
public-private partnerships
Introduction
While several PPP arrangements have been implemented in South Africa, they remain a relatively
new phenomenon. There is still some uncertainty as to what a PPP is, how and under what
circumstances they should be implemented, and how responsibility and accountability for PPP
arrangements should be determined. Moreover, some PPP arrangements have not yielded
satisfactory outcomes for either the departments concerned or the public. Structuring the approach
to PPPs requires standard definitions of key concepts and a set of rules that govern the preparation,
procurement and implementation of these arrangements.

Major “do’s and don’ts” in the Treasury Regulations

The Treasury’s role is not to “second guess” or “micromanage” the decisions of departments. The
primary responsibility for identifying, procuring and implementing PPP arrangements therefore
rests with departments and accounting officers. Treasury approval is only required in those stages
that affect expenditure control and the prudent use of state resources. Treasury criteria require that
PPP arrangements must, among others:
• demonstrate value for money, for example by enabling departments to achieve more with the
same resources or as much with fewer resources
• be affordable, i.e. fit within a department’s budgetary parameters
• be procured using transparent and competitive processes
• show evidence of substantial risk transfer from the department to the private party
• be implemented within a sound and suitable project management and administrative structure.

What is a public-private partnership?

PPPs have many possible variations and the lack of a clear definition has unfortunately confused
the application of PPPs to date. The Treasury Regulations have therefore adopted a simple
definition of PPPs, based on three essential elements:
1. A contractual arrangement whereby a private party performs a departmental function on behalf
of a national or provincial department for a specified time.
2. Substantial risk transfer to the private party. Unless the private party assumes the risks and
responsibilities of the arrangement, the transaction will be treated as departmental borrowing.
3. A schedule of outcome-based financial rewards, derived either from service tariffs or user
charges, from a departmental or other budget, or from a combination of these sources.
Contracts for the supply of goods or services are not PPPs and are subject to existing
procurement legislation and regulations.

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Guidelines for Public-Private Partnerships

What is a “departmental function”?

The Treasury Regulations define a departmental function as:
• a service, task, assignment or other function that a department performs in the public interest or
on behalf of the public service
• any part or component of, or in support of, such a service, task, assignment or other function
• excluding, however, a service, task, assignment or other function that is not of an ongoing
nature.

Types of public-private partnership

The simplest form of PPP is a service contract, where a department typically awards a private party
the right and obligation to perform a service, within well-defined specifications, for between one
and three years. The government retains ownership and control of all facilities, capital assets and
property. More complex PPP arrangements, such as concessions and build-operate-transfer (BOT)
schemes, are characterised by the mobilisation of private finance on a limited recourse basis.
Given the often substantial capital investment by the private party under such arrangements, the
contracts tend to be long, frequently 25 years. Table 2.1 below lists the various types of PPP. This
list excludes full privatisation, as the government’s privatisation initiative is coordinated by the
Department of Public Enterprises in terms of the National Framework Agreement.

Table 2.1 Types of PPP contract

Type of Duration What the contractor Nature of contractor Examples
contract usually receives performance
Service Short-term A fee from the government A definitive, often technical Facility repairs and
contract (1–3 years) for performing the service type of service maintenance;
laundry
Management Medium-term A fee from the government Manage the operation of a Regional water
contract (3–8 years) for the service and a government service supply management
performance-based
incentive
Lease Long-term All revenues, fees or Manage, operate, repair Existing airport or
(8–15 years) charges from consumers and maintain (and maybe port facilities
for the provision of the invest in) a municipal
service; the service service to specified
provider pays the standards and outputs
government rent for the
facility
Build-operate- Long-term The government mostly Construct and operate, to Building,
transfer (15–25 years) pays the service provider specified standards and construction and
on a unit basis outputs, the facilities maintenance of
necessary to provide the regional schools,
service prisons or hospitals
Concession Long-term All revenues from Manage, operate, repair, New airport or
(15–30 years) consumers for the maintain and invest in seaport facilities, toll
provision of the service; the public service infrastructure road or bridge
service provider pays a to specified standards and
concession fee to the outputs
government and may
assume existing debt

While service delivery through a PPP changes the means of delivering services, it does not change
a department’s accountability for ensuring that the services are delivered. The department’s focus
shifts from providing the service to managing the service provider, i.e. becoming a contract
manager rather than a resource manager.

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 Chapter 2: The basic “what” and “why” of PPPs

Why use public-private partnerships?

The simplest forms of PPP have been part of South Africa’s procurement landscape for some time.
More complex arrangements, in particular contracts of long duration involving private finance, are
relatively new and have thus far produced mixed results. Correctly structured, however, they are a
useful service delivery option from both an operational and a strategic perspective.
Operationally, the benefits of PPPs include efficiency gains; output focus; economies generated
from integrating the design, building, financing and operation of assets; inventive use of assets;
innovative financial structuring; managerial expertise; and better project identification. These
benefits can result in better or more services for the same price, or in savings that can fund other
services or more investment elsewhere.
Strategically, partnership contracts enhance accountability by clarifying responsibilities and
focusing on the key deliverables of a service. A department’s managerial efficiency can benefit
significantly from such a contract, as existing departmental financial, human and management
resources can be refocused on strategic functions.
Using private finance rather than public finance does not mean that more expenditure can be
afforded as, in the long run, the cost of borrowing in private finance deals will typically be higher
than conventional government borrowing. PPPs are therefore not about gaining access to private
capital. Since the government can normally borrow more cheaply, the gains from the private
operator’s efficiency must exceed this difference in borrowing cost. The real benefit of PPPs is the
value for money derived from the operational and strategic benefits mentioned above.
These benefits are not, however, inevitable, but are dependent on at least three conditions:
• An operational need for private sector skills to deliver a service
• An identifiable market of private sector bidders prepared to compete for the opportunity to
finance and deliver a project
• The appropriate allocation of risk.

What is “value for money” in public-private partnerships?

The concept “value for money” is discussed in more detail in Chapter 4. The Treasury Regulations
state that a PPP provides value for money if the net cost of private service provision is lower than
the net cost of departmental provision of the same standard of service. In other words, value for
money is achieved when the private sector can provide a given level of service at least as cheaply
as the public sector.

What is “affordability” and who determines it?

Affordability relates to whether the payments required over the whole PPP project life can be
accommodated in the budget of the relevant department, given its existing commitments. A
particular PPP contract may offer such a high level of service that it is unaffordable, even though it
provides value for money. Affordability and value for money are equally important. If a project is
unaffordable, it undermines the government’s ability to deliver other services and should not be
pursued, even if it is good value for money. For this reason, the relevant treasury plays the leading
role in assessing the affordability of proposed PPP projects.

What is “risk transfer” and why is it important?

Chapter 6 of the Guidelines focuses on risk issues and risk transfer. In short, both the private sector
partner and the government are concerned about risk transfer and management. Accounting

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Guidelines for Public-Private Partnerships

officers in government seek contracts that limit unanticipated liabilities and that clearly define the
application of public sector guarantees or performance undertakings to enhance the viability of a
project. Private parties, in turn, put time, technological expertise and money at risk and seek
conditions that enable them to mitigate these risks effectively. When risk resides with the party
best able to manage it, the resulting efficiency gains can be considerable. Where private finance is
obtained without risk transfer, there are no efficiency gains to offset the higher cost of capital.
Such deals are not true PPPs; they simply involve borrowing at a higher rate of interest. Therefore,
a deal that does not involve adequate risk transfer should be treated as borrowing and recorded
accordingly, as required by the relevant national and provincial government legislation.

Do the Treasury Regulations apply to public-private partnerships

in the local government sphere?
No. The Regulations apply only to PPPs in national and provincial departments. Local government
PPPs are implemented according to the Municipal Services Partnerships Policy and related
legislation prepared by the Ministry of Provincial and Local Government.

Conclusion
The Treasury Regulations support the prudent use of state resources by ensuring that accounting
officers and other officials address key issues. These include application of the Public Finance
Management Act, affordability, value for money and best practice. This chapter provided short
definitions of these concepts; they are explored in more detail in the following chapters.

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 3
Starting off: identifying projects
and selecting a team

Project identification and preliminary business case

Objectives
Identify a PPP and ensure that capacity is in place for its implementation.

Key questions Processes

• Does it fit strategically? • Strategic planning
• Is it affordable? • Preliminary business analysis
• What capacity exists and where? • Team selection
• Is market demand sufficient? • Contracting external expertise

Project into system

Introduction
This chapter focuses on the issues departments should consider at the start of the PPP project
cycle, including:
• identifying candidate PPP projects and their outcomes
• determining how a PPP may improve the cost-effectiveness of the department’s operations.
Sound management of the PPP process is critical and departments should establish an effective
management structure at the start of the process, as suggested below.

What the Treasury Regulations say

Because the Treasury Regulations focus on the financial dimensions of PPPs, they do not deal
explicitly with the identification of a PPP project. This is left to line departments, who may consult
the relevant treasury about fiscally relevant aspects of the project selection and business case
development, but are not compelled to do so. Similarly, team selection falls largely outside the
ambit of the Regulations, other than the requirement for accounting officers to implement
appropriate arrangements for managing the project.

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Guidelines for Public-Private Partnerships

What this means in practice

PPPs allow departments to restructure and improve the cost-effectiveness of their operations, and
can be both strategic and operational tools. A department should therefore consider the potential
benefits it may expect from a PPP. Box 3.1 below lists several possible overall objectives that can
steer the subsequent development and implementation of the project.

Box 3.1 Typical PPP objectives

• Achieving cost savings

• Focusing on strategic business functions
• Improving quality
• Gaining access to new skills
• Accessing new technology
• Achieving greater operational flexibility
• Improving operational accountability

PPPs are not a panacea for all the challenges that confront a department. They do not absolve
accounting officers from their responsibility for ensuring satisfactory departmental service
delivery. After examining the PPP option, a department may well decide not to proceed with a PPP
for a particular function. However, even such an initial examination and comparison process can
be of benefit and result in substantial savings, such as the following:
• Accounting officers may better understand the service delivery requirements of their
departments.
• Focusing on the delivery of services, rather than on the more traditional governmental
processes of procuring and managing staff and physical assets, may enhance cost awareness.
Planning for PPPs should be an integral part of the national and provincial development and
budget planning processes. As such, PPPs should also be included in the Medium Term
Expenditure Framework (MTEF), which requires national and provincial departments to plan for
multi-year priorities (over three-year periods) both individually and in relation to the government’s
overall budgetary planning.
Planning reviews provide a good opportunity for dealing with PPPs. Because the PPP option is
relatively new, departments may need to revisit existing strategic plans. Where the PPP option is
favoured, appropriate strategic planning processes should be initiated both within the department
and in consultation with other departments and stakeholders.
The Treasury Regulations do not lay down absolute rules for determining which projects can or
cannot be considered for a PPP. Accounting officers and other senior officials in each department
have to base this judgement on the individual strategic and business cases. However, the policy,
planning and contract management functions of a department are usually not devolved to a PPP
arrangement.
When identifying candidate PPP projects, departments should take the following steps:
1. Document and verify the strategic and operational benefits of a PPP, compared to the
continuing performance of the function by the department. Typical strategic questions include
the following:
− What are the department’s priority services and functions?
− Is there a general public demand for the service?

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 Chapter 3: Starting off: identifying projects and selecting a team

− What are the expectations of stakeholders – the department, user groups and investors? (see
Box 3.2)
− How many current employees will be affected by the proposed PPP?
− Are public controversies likely to make this project the target of any NGOs or political or
social pressure groups, which would discourage private investors and force up costs?
− Is there a pressing need to change the method of service delivery?
− Which services and functions can be improved?
− Will there be genuine risk transfer to the private sector?
− Do existing facilities meet the required standards and who would be best suited to undertake
expansions, upgrading and maintenance?
− Which core functions or services should the government perform? Which others may
appropriately be earmarked for some form of PPP?
− Are PPPs a viable option relative to others?
− Do private parties have the appropriate skills and investor interest to perform the functions
and services considered for PPPs?
− Are there strong indications that the project can provide value for money?
− Is there an identifiable revenue stream that this project can capture?
− Is political will sufficient for the project to move forward?
− Is there sufficient organisational capacity to carry out the project?
− What external assistance might be required?

2. Determine and quantify, as far as possible, the expected outcomes for the performance of the
departmental function.
3. Identify the actions required to steer the PPP through to expected start-up. This should include
an indicative time frame. Getting started usually entails the following steps:
− Plan the timing and scope of consultative processes with labour and other stakeholders.
− Determine contractual matters: what type of PPP contracting arrangement is expected, e.g. a
BOT, concession or management contract.
− Indicate how the PPP is to be procured.
− Indicate the major risks and how these are to be allocated between the department and the
private party.
4. Identify candidate functions or services and prepare a services profile and initial scope of
proposed projects. Box 3.3 provides an example.

The project team

Starting early
Projects do not move forward without project champions and the core project team should be
identified as soon as possible. The composition and membership of the team usually change over
time as additional requirements emerge.

Developing the project strategy

Prospective project team members may initially work with the accounting officer to form an
internal strategic planning task force or informal project identification committee. They will
initially focus on assisting the accounting officer in analysing and refining the elements of the
strategic plan, which will directly influence project identification and implementation. For the
duration of the project, the project team will be responsible for day-to-day management – liaising

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Guidelines for Public-Private Partnerships

Box 3.2 Stakeholder consultation

Relevant stakeholders must be identified and engaged from the outset. These typically include potential
users of the service, staff likely to be affected, residents of an area where construction is to take place and
relevant government departments.
In dealing with a stakeholder, discussions should remain focused on issues pertinent to that specific
stakeholder. For example, tariffs are more relevant to the users of the service than to labour
representatives.
Discussions with affected staff are often complex and should focus on specific issues. Negotiations should
ideally be structured around a clear agenda that addresses:
• potential job losses
• conditions of service
• parity
• grading
• benefits
• transfer and deployment.
Discussions about sectoral policy should be specifically excluded from discussions with labour.

Box 3.3 An example of a project profile and scope

Project name : Baru Container Terminal Development Project

Project agency : Southern Region Ports Authority
Capital and Technology Centre
No. 10 Thabo Road, Pretorburg 100844, South Africa
Contact : Mr Themba Sindane, Project Director
Phone : +27 99 632-4840
Fax : +27 99 632-4185
Project value (rand) : 290 million

Objectives and scope

The objectives of the project are to expand the container-handling capacity of the port to about 5 million
twenty-foot equivalent units by 2015. A private operator will develop the vacant land at and adjacent to the
present Slip 0 into a container backup and stacking area. The project will be awarded as a 15-year
concession. The concessionaire will develop the wharf, transit shed and container backup and stacking
area and provide all container-handling equipment. At the end of the concession period, the incumbent
can rebid for the project and will be given a margin of preference of 10 per cent. The project will save the
port authority approximately R42 million in upgrading the port. It will also yield a concession fee to
compensate the authority for the economic value of the land. A feasibility study will be commissioned in
January 2001 to refine the initial business case and confirm the strategic value of the project. A full
environmental impact study will be required as part of the feasibility study.
Procurement
The project will be procured using an international competitive bidding process from a shortlist of port
operators and developers identified through a pre-qualification process.
Project development stage
The strategic assessment and preliminary business case will be developed by June 2000 and the final
feasibility study by December 2001. Treasury approval to proceed with pre-qualification is expected by
March 2002.
Accounting officer
Randhir S. Singh
General Manager
Southern Region Ports Authority
rsingh@[Link]

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 Chapter 3: Starting off: identifying projects and selecting a team

with bidders, advisers, project board members, the press, users and trade unions while managing
logistics and resources. In preparing for this, the newly constituted team should develop a practical
strategy for project development. This strategy should consider the suitability and viability of
various PPP implementation options, identify and analyse likely obstacles during different phases
and develop measures to manage such obstacles. Departments can approach the Treasury’s PPP
Unit for technical advice in this regard.

Team and skills selection

The standard principles of project management apply when selecting staff and creating an effective
team. As public managers are generally familiar with these principles, the Guidelines will not deal
with them at length.
Important aspects are to:
• clearly assign specific responsibilities to each member
• delineate lines of accountability in the team and in relation to the department and other agencies
• define the results expected and indicate the rewards linked to the project.
Careful planning is required when selecting the mix of competencies and specifying the capacity-
building and empowerment objectives for the team. Negotiation with bidders is fundamental to a
PPP and the skills of the team should correspond to the probable composition of potential bidding
consortia. Team composition will therefore vary from partnership to partnership. However, some
skills are likely to be required in most PPPs, as listed in Box 3.4. Appropriate external advisers
should be involved to supplement the skills of the internal team.

Box 3.4 Skills requirements

The skills generally required in PPP arrangements include the following:

• Financial expertise is typically required around the commercial structure of special purpose
companies, the viability and quality of bidders’ funding proposals, the financial aspects of bidder
evaluation, and negotiation to financial close.
• Legal expertise is needed on procurement issues, legal structure, risk assessment and allocation, as
well as contingent liabilities, commercial matters and service contract documentation.
• Procurement advice will be specific to PPPs, as these are often more complex and long term than
most other procurements in the public sector.
• Expertise may also be bought in to assist with output specifications, definition of performance
standards and design of reporting techniques.
• Technical know-how is needed to assess project design proposals, provide cost evaluation and
develop user briefs and specifications of services.

Training and skills development

Team composition raises the question of training and capacity building. While government
departments will probably always require advice and support from external experts, some in-house
skills should clearly be developed. To this end, Annexure I provides a schedule of PPP trainers in
South Africa and abroad.

13
Guidelines for Public-Private Partnerships

Conclusion
PPPs require systematic prioritisation and strategic planning from the early stages of the project’s
life cycle. In the public interest, service requirements should be clearly articulated and a strategic
analysis and preliminary business case conducted to stipulate the department’s expectations of and
future actions on a proposed PPP. A core project team should be selected as soon as possible to
direct PPP activities.

14
 4
Assessing the feasibility of public-
private partnership arrangements

Feasibility assessments

Objective
Determine comprehensively the feasibility of a proposed PPP.

Key questions Processes

• Is it technically sound? • Expert analyses
• Is it financially viable? • Public sector comparator
• Does it offer value for money? • Treasury examination
• Is it affordable?

Project can go ahead

Introduction
Once a department is satisfied that a candidate PPP has a sound strategic and preliminary business
case, it needs to conduct a detailed feasibility study to:
• establish whether the project is in the public interest
• strengthen the strategic and business case for the project
• determine whether it is financially viable
• confirm that it complies with all relevant laws and regulations
• determine the factors that will make it attractive to private investors
• prepare a comprehensive assessment of its value for money.
During this phase, the relevant treasury should also assess the affordability of the project.

What the Treasury Regulations say

The Treasury Regulations require accounting officers to ensure that a feasibility analysis is
conducted to assess whether a proposed PPP agreement will be in the best interest of both the
department and the public.
To this end, the Treasury Regulations prescribe that a feasibility analysis must do the following:
• Specify the nature of the relevant departmental function and the extent to which a private party
can perform this function through a PPP arrangement. Both legal and technical aspects of a
potential project must be considered.

15
Guidelines for Public-Private Partnerships

• Explain the strategic and operational benefits for the department of a private party’s
involvement, as well as any advantages or disadvantages to the public.
• Determine whether the expected results are compatible with the overall strategic objectives and
plans of the department and government policy.
• Assess whether such an arrangement will provide value for money and be affordable for the
department.
• Include any relevant data and the economic criteria used to justify these assessments.
• Explain the approach and methodology the department plans to follow to procure the services
of a private partner.
• Explain the capacity of the department to enforce the arrangement and to monitor and regulate
implementation and performance in terms of the arrangement.

When to do feasibility studies

Subject to satisfactory strategic analyses, the detailed feasibility analysis should begin as soon as
possible. Departments should conduct the feasibility analysis in stages, determining the overall
feasibility of the project before undertaking more detailed analysis. For example, it is crucial to
ascertain early on that the project is affordable within the parameters of the budget. This will save
considerable effort later on and reduce the risk to prospective private sector partners. The
department must be committed to the proposed project to avoid wasting the time of private
investors who invest significant resources in preparing bids. If a department is ill prepared and has
to call off a project when new information comes to light, the bidders’ extensive work becomes
futile. For this reason, no bid document should be issued before the relevant treasury has signed off
on the feasibility analysis.

Using the right skills

The technical, legal and financial aspects of PPPs require expertise that is seldom available in the
public sector. Internationally, PPPs have often necessitated skills to be bought in to assist
government departments. Good specialist advisers are worth the expense, especially on large-scale
projects. They enable a department to master the process from the outset, resulting in savings in
project implementation. The government team should ensure that it has access to specialised
consultants, legal advisers, financial advisers and other specific technical assistance.
Specialist advisers are typically designated on a project-specific, as-needed basis and only after the
decision to proceed with the project has been made. However, financial and legal advisers should
probably be appointed during the development of a more detailed feasibility analysis (see Chapter
5). Financial advisers are likely to be effective when the project scope and output requirements are
being defined, as services levels depend on affordability and budget allocations. Legal advisers
may be required to assess potential risks, contingent liabilities and the legal framework for the
project.

What to assess
A feasibility assessment has nine essential components:
• Identification of all stakeholders
• Assessment of current infrastructure and current practices and procedures
• Evaluation of the department’s organisational structure with regard to the service to be assessed
• Determination of the total costs of providing the service
• Assessment of current revenues generated, if any, for providing the service

16
 Chapter 4: Assessing the feasibility of PPP arrangements

• Determination of source(s) of revenues utilised by the department to provide the service

• Determination of the short- to medium-term capital needs for providing the service and the
ability of the department to obtain the necessary resources
• An analysis of relevant PPPs that might be employed to provide the same service
• A recommendation on the type of PPP to be employed, supported by a financial and
institutional analysis
Feasibility studies for PPPs address technical aspects, value for money and affordability.

Technical issues
Technical issues include design, legal requirements, service levels, expected outcome, technology
requirements and institutional arrangements. Analysis of such issues is necessary for specifying
outputs and setting the standards for value-for-money and affordability assessments. The
department is responsible for this work and relevant internal and external expertise can be
mobilised as required.

Value for money

This fundamental element of the feasibility study must be done in consultation with the relevant
treasury. Accounting officers must be familiar with the concept “value for money” and understand
how it is determined. The technical nature of the analysis generally necessitates expert input and
advice.
According to the Treasury Regulations, a PPP provides value for money if the net cost of private
provision of the departmental function is lower than the net cost of departmental provision. In
addition, the standard of service delivery must at least be equivalent to the standard achieved
through departmental provision.
Best value for money can only be ascertained later, when the cost of public provision is compared
with the bids received by private parties. However, it is essential to assess, during the feasibility
analysis, what it would (or does) cost a department to provide the function being considered for a
PPP. The Treasury Regulations thus require a public sector comparator (PSC) to be used as a
benchmark for determining this hypothetical (or actual) cost, and hence value for money. As a PSC
is complex to construct, the department will probably require external assistance to assess the
relative costs and benefits of the project.
Because the PSC is an analytical tool, it cannot provide conclusive answers and is useful only
when:
• standard public sector rules and regulations have been followed to accurately calculate the
comparator
• sound and extensive cost accounting data have been used to ensure that all relevant costs are
identified and measured, including all overhead costs, contingent costs and the net gain or loss
in tax revenues.
Box 4.1 highlights the main elements of the use of a PSC.

17
Guidelines for Public-Private Partnerships

Box 4.1 The public sector comparator

To compare whether private sector bids for the relevant services will offer value for money to the public
sector, it is common practice to construct a public sector comparator (PSC). The PSC estimates the cost
of providing an equivalent service in the public sector and is used to evaluate the prices offered to the
public sector by the private sector.
The PSC process involves the following steps:
• Obtain the existing cost for the services as currently provided by the public entity, including:
– capital costs, plus development costs (if any)
– operating costs
– salaries and staff complement
– municipal charges
– taxes and others.
• Adjust these costs for any variances to the levels of services that will be required from the private
sector. The higher the levels of services required, the more the costs must increase.
• Add any increased marginal cost items for providing the additional services. These are hidden costs,
such as insurance, legal fees, salary of the maintenance team, etc.
• If not already taken into account, add financing costs at terms and conditions that are acceptable for a
public sector fund-raising.
• Add a bias adjustment to indicate any probable cost overruns in the public sector, non-quantifiable
factors, risk transfers, economic benefits and social benefits related to sourcing the service from the
private sector. The bias adjustment will vary depending on the project and has to be thoroughly
analysed and debated with the relevant treasury.
The cash cost to the public sector for each year of the project should be discounted at the average
weighted cost of public sector debt in real terms. The resultant net present value (NPV) number will later
be compared to the bidders’ NPV number calculated on the same basis. The lower the NPV, the cheaper
it is for the public sector. If the bidders’ NPV is less than the NPV calculated for the public sector, there is
clearly value for money and the project should proceed.

Affordability
A PPP is affordable when the expected financial commitments can be accommodated within the
department’s existing budget and the relevant treasury’s projections of the budget beyond the
MTEF period. The treasury therefore determines the cash flow implications of the contractual
obligations of the PPP. In broad terms, the treasury analyses the department’s current budget and
projected future budgets, as well as any implied budgetary precedent.
To develop sound PPPs and achieve fast treasury approvals and timely implementation,
departments should develop an affordability perspective as soon as possible. A PPP will often
require adjustments between the capital and recurrent budget of the department. The Treasury
Regulations oblige accounting officers to review these implications with the relevant treasury and
obtain its approval. Departments should discuss these aspects with the relevant treasury well
before setting final budgets, and not only after tenders have been received. For this process,
departments should identify:
• adjustments to recurrent expenditure, such as staffing, equipment rental, leases, technology
licensing arrangements, repairs and maintenance
• adjustments to capital expenditure associated with replacement, expansion and/or technology
upgrades
• any potential proceeds from the sale or transfer of state assets to the PPP arrangement
• the timing, structure and profile of receipts and payments under the PPP arrangement.

18
 Chapter 4: Assessing the feasibility of PPP arrangements

Conclusion
During this phase of the PPP project life cycle, the feasibility analysis allows the department to
develop a more comprehensive feasibility analysis based on the preliminary business case. The
need for and objectives of the project should be clearly established, value for money and
affordability should be determined and implementation arrangements identified.

19
 5
Procuring public-private partnerships

Procurement

Objectives
Evaluate bids from potential service providers
in terms of procurement strategy.

Key questions Processes

• Which service provider is preferred? • Pre-qualification
• Will real requirements be met? • Develop evaluation criteria
• Is the bid evaluation reasonable? • Issue bid documents
• Evaluate bids
• Select preferred service provider

PPP service provider selected

Introduction
After the relevant treasury has signed off on the value-for-money and affordability assessments,
the department can begin to procure the services of a private party. This chapter examines the
requirements and recommended practices for evaluating and selecting private parties for PPP
arrangements.

What the Treasury Regulations say

The Treasury Regulations require a PPP to be procured in accordance with the department’s
procurement strategy. It must include competitive bidding, a pre-qualification selection process
and selection criteria to ensure that the preferred bid offers best value for money. The Regulations
allow preferences to be granted to persons disadvantaged by unfair discrimination, provided that
these do not compromise value for money. They also allow incentives for rewarding genuine
innovators in the case of unsolicited proposals.

Pre-qualification
The purpose of pre-qualification is to compile a shortlist of suitable firms with the experience and
capacity to implement the project. Pre-qualification ensures that a manageable number of firms are
invited to submit final bids. This is necessary, as bid costs for PPP projects are often substantial

21
Guidelines for Public-Private Partnerships

and potential bidders are more likely to bid if they have a better prospect of winning. Pre-
qualification also improves the quality of the bids, since bidders engage more intensively in the
process.
Pre-qualification requires prospective bidders to demonstrate that they have:
• specific experience in the sector (e.g. toll road operation)
• successful performance on similar projects, with references from former clients
• relevant experience and performance in similar economic, demographic, geographical,
topographical or climatic areas
• appropriate personnel and equipment capabilities
• financial capacity to carry out the project
• capacity and commitment to promote empowerment and affirmative action.
The pre-qualification criteria generally favour organisations that are recognised providers of
similar services, with a dedicated staff and management. However, this should be balanced to
foster effective and meaningful participation by empowerment firms and small, medium and
microenterprises (SMMEs).
Once a viable project has been identified and suitable pre-qualification criteria have been
developed, the department should seek expressions of interest through a request for qualification
(RFQ). A wider solicitation process is more likely to attract interest from high-quality and
experienced entities. Invitations for pre-qualification should be advertised in widely circulated
newspapers, trade publications and periodicals and on the department’s Internet site.
Box 5.1 shows a sample pre-qualification advertisement for a hypothetical toll road project.
Depending on the complexity of the project, the pre-qualification document should require some or
all of the following disclosures:
• A signed pre-qualification submission form
• An executive summary
• The organisational structure and capability of the firm or consortium filing the submission
• The filer’s technical capability
• The filer’s financial capability, including proposed funding of the project
• The specific personnel selected to work on the project, together with examples of relevant
experience and their CVs
• The legal capability of the filer
• The filer’s experience with PPPs
• The filer’s empowerment and affirmative action policy

Other matters that may be addressed include the filer’s concept of how the submissions are to be
adjudicated. All relevant documentation should be provided, including feasibility studies or
pertinent in-house reports. A charge to defray the costs of preparing and conducting the pre-
qualification is appropriate. A common means of ensuring that candidates provide appropriate
information is to supply them with a questionnaire that guides their responses into a specific
format. Questions must clearly reflect the criteria that the department wishes to apply. The PPP
Unit will in due course develop such a format to assist departments.
Once clear and objective pre-qualification criteria have been developed, the pre-qualification
process should be reasonably straightforward. Accounting officers should be satisfied that all the
entities that have been shortlisted are capable of carrying out the project fully and operating the
project facilities efficiently. Since unsuccessful candidates may require a debriefing, the
department should ensure that it has a clear explanation and record of why these candidates were
not selected.

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 Chapter 5: Procuring PPPs

Box 5.1 Outline advertisement inviting pre-qualification

REPUBLIC OF SOUTH AFRICA

DEPARTMENT OF TOLL ROAD OPERATIONS
INVITATION TO PARTIES INTERESTED IN PRE-QUALIFYING FOR
THE EASTLINE EXPRESSWAY CONCESSION
The Department of Toll Road Operations invites parties interested in pre-qualification for the development
and operation of the 50 kilometre Eastline Expressway in Gauteng. The project will be offered on a
concession basis, with the investor collecting all revenues but being responsible for all costs.
The successful bidder will be the one whose proposal offers the highest discounted present value of
concession payments to the government and whose technical proposal is consistent with specified national
technical and environmental standards for the construction and operation of toll roads. The Department
undertakes annually to review the tolls and toll structure in the project area, and to make all adjustments
necessary to provide the investor with a reasonable opportunity to earn an appropriate risk-adjusted return
on investment. A feasibility study for the project was prepared on behalf of the government by Vandervaal
and Sindane (Pty) Ltd of Cape Town. Bidding for the project will be conducted on a single-stage, single-
envelope basis. Only those bidders who have been successfully pre-qualified will be permitted to bid.
The closing date for submission of pre-qualification documents is 17:00 on Friday, 30 October 2000. The
documents should be submitted in the sealed box marked “Eastline Expressway Concession”, on Level 3 of
the Department’s offices. Those submitting pre-qualification documents should obtain a receipt
acknowledging the submission of the documents from the authorised staff.
The pre-qualification documents (R1 000 per set) or the pre-feasibility study (R3 000) may be obtained
from:
Ms Caroline Moloi
Project Manager
Eastline Expressway Project
Department of Toll Road Operations
107 Jan Smuts Avenue, Roseburg, South Africa
Phone: +27 22 380-0000, Fax: +27 22 380-0001
E-mail: sdc@[Link]

Developing bid documents

To support open and competitive bidding, participation and transparency in the bidding process,
the bid documents or request for proposals (RFP) should clearly stipulate the bid requirements.
The documents should establish the rules of bidding and follow the conventions of public sector
procurement. A copy of the draft contract should be included to facilitate the early identification of
key contract issues (see Annexure II). In procuring a PPP in particular, the points in Box 5.2 below
should be observed.
An RFP that is incomplete is counter-productive and will lead to repeated requests for explanations
and clarifications. As these bid documents form a part of the PPP contract, poorly written and
ambiguous documents are likely to be a source of future disputes and claims against the
department. It is critical that project specifications address the outputs to be delivered rather than
the inputs, allowing scope for private sector innovation in the PPP arrangement.
A bidder’s conference can be held to clarify the bidding procedures and project parameters, inform
bidders of the availability of documents and project-related information, and allow them to inspect
the project site. Bidders’ conferences are normally held between 21 and 45 days after issuing the
bid documents. During the bidders’ conference, any modification of provisions or terminology in
the bid documents should be in writing and be made available to all pre-qualified bidders.

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Guidelines for Public-Private Partnerships

Box 5.2 Some useful pointers for bidding documents

The invitation to bid should generally follow the normal procurement conditions in the public service.
However, several aspects require particular attention in a PPP process. Instructions and initial
correspondence to bidders should at least include the following:
• A full description of the project, including a clear statement of the objectives, scope and expected
outcomes, the population to be served, stakeholder identification, minimum design and performance
standards, environmental standards, existing service levels and tariffs, collection rates, departmental
administration (as it relates to this project), intended service levels (though generally, not methods for
achieving them) and an implementation schedule
• The structure of the bid (e.g. one-envelope or two-envelope bid)
• The bid submission procedures including, among others, the date, time and location of bid submission,
bid security and the bid validity period, and the mode of bid transmission
• Bid opening procedures, procedures for announcing the preferred bidder, method and timing of
protests, and procedures for adjudicating protests
• The proposed timing of the pre-bid conference
• The principles for setting and adjustment of tariffs, tolls, fees, charges and rentals
• The scope and extent of any public support or enhancement measures, financial and otherwise, to be
provided by the department
• A table that indicates the risk allocation between the department, service provider and users
• The bid form and general and specific conditions that will apply to the contract
• A copy of the draft contract describing the nature of the proposed transaction (e.g. BOT, build and
transfer, build-own-operate, concession and so on), including the duration of the contract
• A copy of the pre-feasibility study
• Pro forma performance guarantees
• Appendices, including any relevant economic, social, demographic and environmental data that may
improve the quality of the bid documents, and/or references that may be useful to bidders, including
references to relevant legislation and regulations (e.g. Water Services Act, competition law).

Submission and opening of bids

The authorised staff of the department should open the bids at the time, date and location specified
in the RFP or specified by any extension of the deadline for submission of bids. Bidder
representatives should be allowed to attend. The name and address of each bidder should be
announced and recorded. Each bid received by the deadline should be examined to determine its
responsiveness, i.e. verifying that it complies with the terms and conditions of the bid documents.
Bids that contain arithmetic errors, or are not responsive, should be rejected.
Departments should prepare a comprehensive checklist to ensure that compliance with each
requirement is verified. The results of the examination of bids should be comprehensively recorded
in the bid proceedings. Where bids are not responsive to the RFP, the reasons for their non-
responsiveness should be recorded. In addition, bids deemed to be non-responsive should be
rejected and not be subject to any subsequent evaluation and comparative procedures.

Evaluating bids
The bid evaluation procedure often comprises two steps. Step 1, the technical examination, is to
ensure that the bids address the full technical objectives and performance requirements. Step 2, the
financial evaluation, is carried out only on those bids that are responsive and have passed the
technical examination. Where two-envelope bidding is used, the financial proposals of
unresponsive technical proposals will be returned, unopened, to the bidders.

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 Chapter 5: Procuring PPPs

The present value method of financial discounting is used to compare and evaluate the financial
proposals. The discount rate to be applied in the evaluation will be advised by the relevant
treasury, but will be the same as used in calculating the PSC. These steps are captured in Boxes 5.3
and 5.4 below.

Selecting the preferred bidder

A recommendation to award the contract is based on the match between the technical and financial
criteria and the requirements of the specific type of PPP (e.g. management contract, concession,
BOT). Generally, the contract should be awarded to the bidder whose bid is responsive, has
satisfied the technical evaluation and whose financial proposal provides best value for money. In
the case of a concession arrangement, for example, this means that the proposed schedule of
payments to the contracting entity (i.e. the government) from the private party results in the highest
discounted present value. In the case of a BOT arrangement, the proposed schedule of payments to
the private party from a department results in the lowest discounted net present value.
Chapter 9 provides an example of how these criteria should be applied. However, if none of the
bids satisfies the value-for-money test, all bids should be rejected. A second-ranked bidder should
also be identified in case a satisfactory contract cannot be concluded with the first-ranked bidder.

Box 5.3 Technical examination of bids

The technical examination of bids should pay attention to the following issues:
• The technical proposal should be suitable for local needs – do not use a high-tech solution where a
low-tech one will do; avoid overdesigned facilities; consider the capacity of the department to take over
operation at the end of the PPP contract, etc.
• The proposed technology should be reliable, easy to maintain, with logistical arrangements for
maintenance and support.
• The subcontracting plan should contain the number, nature and quality of subcontractors, and
assurances by the prime contractor for ensuring subcontractor quality and performance.
• The empowerment, affirmative action and SMME plans should be substantive and credible.
• The scope and extent of training programmes for relevant staff should be outlined.
• The plan for utilisation, redeployment or redundancy of the existing labour force, including
reorganisation of work patterns (e.g. job descriptions ), should be proposed.
• The management plan should detail staffing, parent company support and local management.
• Arrangements should be made for the transfer or reversion of project facilities and staff to the
government at the end of the contract period.

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Guidelines for Public-Private Partnerships

Box 5.4 Financial evaluation of bids

The financial evaluation should consider the following criteria:

• The financial flows used in the bid document should be consistent with the minimum technical design
and performance standards and with specifications in the bid documents.
• The financial flows of all bids should be evaluated over the concession period specified in the bid
documents. Bids that show cash flows for shorter or longer periods should be disqualified.
• The rand should be used as the currency of bid comparison.
• Bids should be carefully examined to ensure that reasonable provisions have been made for:
– staffing positions and costs
– operating and maintenance costs
– adequate working capital
– replacement and renewal of equipment during the evaluation period
– licences, permits and payments with respect to technology licences
– income and other taxes.
• The examination needs to ensure that the demand projections and growth rates underlying the
analysis are reasonable and broadly consistent with the demand projections included in the feasibility
study and/or bid documents. If included as part of the bid documents, these versions should prevail
over the demand projections shown in the feasibility study.
• Tariff assumptions should be consistent with those in the bid documents.
• The implementation schedule of the project should be consistent with the cash flows.
• Financing arrangements, interest and amortisation of debt should be properly indicated and accounted
for in the financial proposal.
• The project cost estimates should be complete and account for all construction and operation costs.
Any gaps or uncertainties in the cost estimates are grounds for rejecting a bid.
• The financing plan should also be examined for completeness.

Concluding the evaluation and negotiating the contract

At the conclusion of the bid evaluation, the department should prepare a bid evaluation report that
details the bid evaluation process and the ranking of the responsive and technically compliant bids.
The report should also include:
• the bid proceedings
• the bid evaluation criteria
• a list of all pre-qualified bidders
• a list of all bids that were rejected and the reasons for rejection
• a list of all bids that were subjected to evaluation and the ranking of those bids
• the recommended successful bidder
• the proposed schedule for contract negotiations.
As discussed in the next chapter, the department may then invite the first-ranked bidder for
contract negotiations. The invitation should indicate:
• the deadline for concluding the negotiations – an RFP would typically indicate that the bidder
must maintain the validity of the bid for a definite period of time (i.e. 45 days), anticipating that
contract negotiations will be concluded in that time
• that it reserves the right to begin negotiation with the second-ranked bidder if negotiations have
not reached a satisfactory conclusion by the deadline.
The results of the bidding and contract award processes should be published by:
• notifying all bidders, in writing, of the results of the bid and contract award

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 Chapter 5: Procuring PPPs

• publishing the results of the bid and proposed contract award in widely circulated newspapers
and on the Internet.

Conclusion
The outcome of the procurement process should be a proposal to award a contract to the bidder
whose bid offers the best value for money and satisfies the specified safety, environmental and
performance standards, as well as empowerment criteria.

27
 6
Contracting public-private
partnerships

Contracting

Objectives
Formalise conditions for the smooth transition of service delivery
to the private partner.

Key questions Processes

• Is it realistic? • Goal setting
• Who is responsible for what? • Avoiding micromanagement
• Is it affordable? • Monitoring arrangements
• Is risk being transferred?
• What if something goes wrong?

Contract negotiated

Introduction
Once the preferred bidder has been selected, the contract can be finalised. This often entails
complex negotiation about contract details. It is in the interest of all parties – the department, the
prospective service provider and the end users – that these processes are specific and goal
orientated. They should facilitate a smooth transition from departmental service delivery to service
delivery through the PPP.

What the Treasury Regulations say

Before a department concludes a binding contract for a PPP arrangement, treasury approval must
be obtained for “all budgetary commitments attendant to the agreement”. Accounting officers must
ensure that the agreement accords with departmental and treasury assessments of value for money
and affordability and with departmental procedures for enforcement of the agreement. This must
include adherence to the procedures for monitoring and regulation of implementation and
performance in terms of the contract.
Other requirements are that the risk burden on the department must be appropriate and that the
financial commitments should be denominated in rand and not be affected by fluctuations in the
value of the rand against other currencies.

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Guidelines for Public-Private Partnerships

Confirming that the arrangement is affordable and offers value for

money
Unless the proposed PPP arrangement offers value for money and is affordable, it cannot proceed.
Accounting officers should obtain confirmation from their officials and advisers that these core
conditions have been met. The Guidelines will not deal with this in detail, but accounting officers
should follow the suggestions in Chapter 5 and in the various boxes and annexures to confirm that
the bidding process has achieved a value-for-money and affordable outcome.

Setting up suitable project implementation arrangements

Before awarding the PPP contract, departments should introduce suitable arrangements to ensure
cost-effective implementation of the PPP. However, the temptation to micromanage the private
party should be resisted, especially by departments with limited experience of PPP arrangements.
Instead, the focus should be on monitoring whether the private party is achieving the outcomes
specified in the contract. Key aspects of departmental monitoring and oversight are briefly
discussed below.

Developing a realistic implementation plan

Realistic and effective implementation depends on the department setting achievable time frames
and cost limits, practical design principles and services requirements, and effective management
arrangements. Most of this should be addressed early on, but the finalisation of the contract creates
a new opportunity to discuss key aspects with the service provider as new information might
necessitate some changes. Nonetheless, by the time the team prepares to negotiate a contract, the
major elements of their implementation strategy should be in place.

Negotiations with the private party

During this stage, negotiations should not be reopened over previously settled issues, particularly
prices, costs and other fundamental aspects of the bid. Most commercial terms should therefore be
clarified before the preferred bidder is selected.
The preparation for transition to private service delivery entails refining the conditions to support
the project. A department may take the following steps to limit renegotiation of key conditions:
• Check the realism of bids upfront by considering time frames, economic and financial returns,
costs, technical quality and so on. There are no definite rules for weighing up these factors;
officials should have a clear sense of their priorities and the risks they are willing to take with
preferred bidders. It may be tempting to interfere with the bidder’s proposal, but the department
should manage the tension between ensuring that a proposal is practical and engaging in detail
negotiations.
• Confirm bidders’ commitment: Bidding parties, including debt funders, should provide
sufficient evidence of their commitment to the terms of the bid. Departments should not
demand unconditional commitment; the commitment of debt financiers, for example, will
mostly be subject to due diligence assessments after the preferred bidder has been selected.
Departments should, as far as possible, enable bidding parties and their associates to commit
themselves to the project.
• Bridge affordability gaps: As the commercial details become clearer during negotiations,
upward pressure on price may emerge. This will force the department to reduce some costs to
keep the project affordable, for instance by interrogating the bidders’ pricing assumptions or by
adjusting the risk allocation. While not substantially altering the rewards for private operators,
departments should acknowledge that negotiations do require some flexibility, provided that

30
 Chapter 6: Contracting PPPs

quality, value for money and affordability are not compromised. Only effective negotiation will
ensure the right product at the right price.

Risk assessment and mitigation

Risk assessment, mitigation and allocation are important during all phases of project development,
implementation and execution. Risk assessment and mitigation are therefore not confined to the
transition phase, but this phase is significant as arrangements are finalised to effect the risk
transfers and risk sharing underpinning the project. Box 6.1 outlines the typical risks in PPP
arrangements.
Risk issues are critical to both the private sector partner and the government. The private operator
puts time, technological know-how and money at risk, while the government may be subject to
unanticipated liabilities or be expected to offer limited guarantees or performance undertakings to
enhance the viability of a project. If risk resides with the party best able to manage it, efficiency
gains could be substantial.
Accounting officers want a contract that identifies all risks and allocates these to the party best
able to manage them, while still achieving value for money and affordability. Transactions that do
not affect such risk transfer are best treated as borrowing and should be recorded accordingly in
terms of the legislation governing national and provincial government borrowing.

Box 6.1 Key risks and contractual mitigation options

The major risks that contract negotiators on a PPP need to consider and mitigate include the following:
• Design risk: The private party is responsible for designing the goods and/or services to meet a
specified level of service. Contractually, this typically means that the private party accepts the design
risk and must pay all redesign costs if the facility does not meet the required performance standards.
• Construction risk: The private party is required to construct a facility according to performance
specifications and a time schedule. In the contract, this is often dealt with by letting the private party
bear all costs of meeting specifications and schedule requirements.
• Operating risk: The private party is allowed full control over operating costs, including staffing numbers
and levels. Contractually, the private party is often made responsible for all operating costs and is
expected to absorb all increases. The service provider bears all costs of meeting specifications and
schedule requirements.
• Demand risk: The private party’s revenues depend on the willingness and ability of users to purchase
its services. Contractually, the private party is often expected to identify and satisfy the demand for the
service.
• Tariff risk: The payments for the goods and/or tariffs for the services are set without an agreed formula
or without regard to costs. This typically happens when a government agency or independent sector
regulator sets the tariffs. Contractually, the private party often has to accept that tariffs may not be
adjusted automatically and it assumes responsibility to balance its costs and revenues.
• Collection risk: The private party collects tariff revenues without any collection rate guarantee from the
government. Contractually, the private party tends to bear all the risks for collecting revenues from
users of the goods and/or services.
• Credit risk: The private party is solely responsible for paying its debt and the government makes no
debt investment. The private party is generally responsible for its debt and debt service. However, this
poses a risk to the government if services are suspended when a private party becomes insolvent.
Contractual mechanisms must ensure uninterrupted service, even during insolvency.
It is advisable to set out key risks as early as possible. Including these in bidding documents and the draft
contract will facilitate effective and informed negotiation.

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Guidelines for Public-Private Partnerships

Typical contract conditions

PPP projects do not use a standard contract, but typical contractual provisions include the
following:
• Outputs are specified, such as the scope of the project, performance standards and duration.
• Financial conditions include an agreed methodology for tariff-setting and periodic tariff
review, provisions for adjustment, and allocation of the responsibility for tariff collection. If
services are not paid for by consumer tariffs, or the provider is not responsible for collecting
tariffs, the government must pay for the services. The amount, terms and conditions of the
government’s payment must be outlined, along with the performance conditions for such
payment.
• Responsibility for contractual obligations, such as construction, operation, repair and
replacement of equipment and facilities, is allocated.
• Public sector financial support is outlined in terms of the amount, nature and conditions for the
provision of any financial support, credit enhancement and limited guarantee or undertaking to
be provided by the government. Such support should be the minimum required for project
success, and should generally only be forthcoming during the initial stages when high levels of
financial gearing are required to reduce the average weighted cost of capital.
• Insolvency of the service provider is a risk the government must provide for. The contract
should stipulate how this will be dealt with and what the implications will be for rights and
obligations.
• Administrative conditions typically include the allocation of responsibilities upon termination
of the contract, including the return of facilities and equipment and the transfer of responsibility
for service provision to a successor service provider. Other conditions include the identification
of project milestones and events of default under the contract, the remedies available to either
party in case of default, conditions for amendment and/or renegotiation of a contract, methods
for resolving disputes and plans for unforeseen events or force majeure eventualities.

Box 6.2 A legal checklist

• Clear outputs and service conditions

• Duration
• Incentives for timely commencement and delivery
• Financial conditions (payment and pricing mechanisms, price variations, etc.)
• Responsibilities of signatories
• Subcontracting
• Change of control (i.e. dealing with equity changes on the part of the supplier)
• Public support
• Dealing with defaults, early termination, insolvencies, etc.
• Administration
• Indemnities, insurance, confidentiality, intellectual property rights

32
 Chapter 6: Contracting PPPs

Conclusion
Finalising the contract and effecting a smooth transition from departmental service delivery to
service delivery through the PPP is a very delicate phase of the partnership. It often entails
complex negotiation about contract details. It is in the interest of all parties – the department, the
prospective service provider and the end users – that these processes are specific and goal
orientated and that they facilitate implementation according to conditions that both protect the
various parties and serve the public good.

33
 7
Contract management

Contract arrangement

Objectives
Manage the PPP contract in terms of its goals and objectives.

Key questions Processes

• What type of PPP? • Define relationships
• Who is responsible for what? • Project management
• Who should be consulted? • Consultation
• How is compliance ensured? • Monitoring
• How should defaults be dealt with? • Interventions in defaults
• Dispute resolution

Contract successfully implemented and enforced

Introduction
PPP arrangements require day-to-day management to ensure that they meet the required service
delivery targets and operate as planned. The contract is the basis of a long-term operational and
institutional relationship between the government department and the private service provider, and
this relationship should start on a sound footing.

What the Treasury Regulations say

Regulation 10 deals with managing PPP contracts, and requires departments to establish
mechanisms and procedures for:
• monitoring the implementation of, and performance in terms of, the agreement
• regulating the implementation of, and performance in terms of, the agreement
• liaising with the private party
• resolving disputes and differences with the private party
• overseeing the day-to-day management of the agreement.

Institutional arrangements for contract management

The scope and complexity of the institutional arrangements will vary according to the nature and
requirements of the specific type of PPP transaction. Typically, the following issues require
attention:

35
Guidelines for Public-Private Partnerships

• Defining institutional relationships: The parties to a PPP contract are the department and a
private party, often a project company created specifically for the project. The project company
usually has legally defined relationships with other parties, including the project financiers and
the various construction and operating companies in the project consortium. These companies
frequently negotiate further contracts with subcontractors. A department generally does not
become involved in these arrangements. Its main concern is the relationship with the project
company and, where required, the primary partners in the company, such as financiers and
contractors.
• Department’s project team: Chapter 3 of these Guidelines focuses on the creation and operation
of the project team. Accounting officers have to ensure that their departments can manage a
PPP arrangement. For this purpose a project team is formed, headed by departmental staff and
supported by external advisers.
• Stakeholder and user consultation: A primary challenge is to deal effectively with users of the
service. Stakeholder representatives should be consulted throughout, from conception to post-
contract evaluation. Departments should follow their normal procedures for informing the
public and interacting effectively with interested parties. Specialist input, especially social and
legal, may be required to ensure the best possible means for such consultation.

Monitoring performance
The contract must include provisions for monitoring and enforcement. As a minimum, these
provisions should describe:
• the mechanisms for monitoring the contractor’s performance with respect to the specified
outputs
• how performance will be measured
• reports required from the contractor, the details in such reports and the intervals at which they
must be submitted.
Once the contract becomes legally binding on the parties, the department must monitor the
process, ensuring that both the contract and the relevant laws and regulations are enforced
throughout the project period. Documents such as annual financial statements and technical and
operational reports must be checked regularly to ensure that the private sector partners are in full
compliance with the terms of the PPP.
The department should secure a sufficient budget for monitoring. If any training is required for
effective execution of this monitoring function, this should be done before the project starting date.
Alternatively, impartial outside specialists should be engaged to assist with the performance audit,
evaluation and monitoring.

Ensuring compliance
A PPP delegates to a private party the right to carry out a designated function and to manage risks
associated with the performance of that function. However, a department cannot delegate its
fundamental responsibility and accountability for the function. Departments should therefore use
contract management to ensure that their responsibilities are satisfactorily discharged.
When one of the parties to the contract fails to comply with its obligations, a default occurs.
Departments must ensure that the PPP contract defines:
• the events that constitute a default, e.g. the failure of a PPP service provider to attain the
contractually prescribed service quality standards by the specified date

36
 Chapter 7: Contract management

• the remedies that may be exercised in the event of a default, e.g. penalties or specified
liquidated damages to compensate the government for imputed costs or damages suffered as a
result of unsatisfactory service delivery.
As the above implies, the definitions of defaults and remedies under a contract are closely linked to
the specification of the performance standards. The contract must therefore:
• Distinguish between trivial non-compliance and the material or repeated non-compliance that
constitutes default.
• Provide for clear and simple procedures for one party to notify the other of the alleged
existence of a default. This should allow the other party to respond to the circumstances that led
to the default within a specified and short period of time. For example, the contract may specify
that the aggrieved party should issue to the non-complying party a letter that describes the
default, the proposed remedial action and the time frame for carrying out the remedial action.
• Specify a schedule of remedies that are consistent with the nature and importance of the event
of default and its impact on the procuring authority or the public. The contract should also
specify the defaults that constitute grounds for termination of the contract.

Resolving disputes and other issues

Procedures for resolving disputes between the parties should be clear, low-cost, timely and
effective. This will reduce the risk of unresolved disputes affecting the quality, cost and
availability of public services. Contracts should provide for:
• mechanisms to minimise the incidence of disputes (e.g. regular meetings can be instituted to
raise disputes, propose solutions and monitor implementation)
• methods of dispute resolution aimed at minimising court litigation (e.g. conciliation, mediation
or arbitration)
• safeguards to ensure the continuity of important services during a dispute, stipulating that both
parties are to perform their respective obligations pending the resolution of the dispute.

Conclusion
Ensuring compliance requires effective monitoring, supported by institutional arrangements that
draw on appropriate professional skills and that succeed in involving the key stakeholders.

37
 8
Post-contract completion evaluation

Post-contract evaluation

Objectives
Assess value for money and performance and learn lessons for future projects.

Key questions Processes

• Did the project achieve its goals? • Goal-based assessment
• What mistakes were made? • Ongoing mentoring
• How could similar future projects be • Communication
improved? • Work with PPP Unit

Project assessed and lessons learnt

Introduction
A PPP arrangement should be assessed after completion to determine whether it has provided
value for money and to gain insights for future projects.

What the Treasury Regulations say

Although the Treasury Regulations do not deal explicitly with post-contract completion
evaluation, they implicitly acknowledge the need for effective oversight and best practice.
Evaluation is an integral part of such quality control and feedback.

Key aspects of a post-contract completion evaluation

The essential ingredients of a post-contract evaluation of a PPP include the following:
• Clear objectives and output specifications: If the original objectives and outputs were not
clearly specified, it will be more difficult to evaluate the project objectively and effectively.
• Strategic context: In addition to project-specific objectives and criteria, a PPP must also be
evaluated against the department’s strategic goals – how it contributes, relative to other delivery
mechanisms, to achieving these and overall sector goals.
• Ongoing monitoring and communication: During project implementation, the need for regular
monitoring and accurate records must be impressed on the private parties. This will enable the
contractor to correct problems, build on strengths and adapt to changing circumstances.

39
Guidelines for Public-Private Partnerships

• Well-defined benchmarks: The evaluation should address the value-for-money considerations.

Information from monitoring will enable accounting officers to compare the mode of delivery
through a partnership with other partnership or delivery options.
• Working with the national Treasury’s PPP Unit: The PPP Unit in the national Treasury has a
technical support role, among others to assist departments in their evaluation processes.

Conclusion
Evaluation allows departments to review their achievements and derive lessons for the future. In
the case of PPPs, it should reflect on the contribution of this mode of delivery relative to others.
The strategic goals of the department, the specific project objectives and the technical
considerations that guided project design are important starting points for such an evaluation. The
outcome should provide lessons for future projects and, where required, assist in determining the
future of the particular service or facility.

40
 9
Dealing with unsolicited bids

Dealing with unsolicited bids

Objectives
Assess unsolicited project proposals to capture innovation
while ensuring competition.

Key questions Processes

• Does it add value? • Consider options
• Is it unique? • Reward initiative
• Is it feasible and affordable? • Open bidding
• Does it fit strategically?

Unsolicited bids duly considered

in terms of departmental strategy

Introduction
A contract for a PPP arrangement that has been derived from an unsolicited project proposal may
only be awarded after it has complied with all the requirements of the Treasury Regulations. In
particular, departments need to ensure that such proposals make strategic sense, offer value for
money and are affordable. Moreover, such proposals must also be subject to open and competitive
bidding before the department selects the service provider and enters into a legally binding
commitment for the project.
Departments should only consider unsolicited proposals where these have genuine merit or valid
intellectual property, based for example on:
• a comprehensive and relevant project feasibility study that has established a clear business case
• an innovative design
• an innovative approach to management
• a new and cost-effective method of service delivery
• a new and effective approach to bundling or unbundling services or to processes re-engineering.

What the Treasury Regulations say

Where an unsolicited proposal has valid intellectual property and the department decides to
proceed with the project, the Regulations allow the department to reward the private protagonist of
the proposal. However, the monetary reward should be appropriate and reasonable, with a fair
recognition of the value of the private party’s proposal and associated intellectual property. It

41
Guidelines for Public-Private Partnerships

should not exceed the cost of developing the proposal. In addition, it must be fully disclosed to all
parties in the invitation to bid (see Chapter 5 on the preparation of an invitation to bid).

Options for and approaches to the provision of preferences or

rewards
If the above requirements are satisfied, the department may negotiate a reasonable recognition or
reward with the private party that submitted the unsolicited proposal. The simplified case study in
Box 9.1 below is used to illustrate practices for rewarding the value of an unsolicited proposal. It is
based on a policy developed by the National Roads Agency.

Box 9.1 A simplified case study

A private party has prepared a comprehensive feasibility study for the development of a new container
terminal at an existing seaport. The feasibility study has established the following:
• A sound and well-reasoned business case for the terminal
• The economic, environmental and financial viability of the project
• Feasible and cost-effective recommendations to minimise the use of scarce land at the port through an
innovative method of container stacking and management
• The projected demand for the facilities, which will allow the private operator of the terminal to generate
satisfactory financial returns and pay the government port owner a concession fee of R1,5 million plus
R7,75 per twenty-foot container moved through the port
• Container traffic, which is expected to grow from 900 000 containers in the first year to 5000 000
containers by year 15 – an average of about 13 per cent a year
• Concession fees payable to the government port authority, which amount to R8,48 million in the first
year, increasing to R42,0 million in year 15, after which the port will be turned over to the government
port authority
• The costs involved: the private operator’s project cost is estimated at R300 million and the audited cost
of the proposer’s feasibility study was R12 million

After reviewing the feasibility study in the above example, the government ports authority
recognised that the unsolicited proposal has identified a sound business case, has merit and has
saved it from having to organise, prepare and finance a similar study. Moreover, the authority has
used this feasibility study to prepare the project’s value-for-money assessment and it forms the
basis of the relevant treasury’s affordability assessment of the project.
The Treasury Regulations require that projects be subject to open tendering. The winning bidder
will be the one whose promised schedule of concession payments to the authority has the highest
net present value.
The port authority wants to reward the proposer, before the bidding starts, for the value of its
feasibility study, and will examine each of the following preference schemes:
• Option 1 – A preference during the bid evaluation process: The authority can, before the start
of the bidding process, provide the proposer with commercially reasonable preferences in the
bid evaluation process, probably through a preference in the value of the final bid prices
received from each bidder. In this case, the authority has decided to value the preference at R12
million, representing the value of the feasibility study.
• Option 2 – Purchasing the intellectual property rights: A department may negotiate with the
proposer to purchase the intellectual property rights to the unsolicited proposal. The port
authority in the example can pay the proposer an amount equivalent to the cost of the feasibility

42
 Chapter 9: Dealing with unsolicited bids

study. The authority then owns the intellectual property rights to the proposal and feasibility
study and can use it freely. Should the parties fail to agree on preferences or on the purchase
price of the intellectual property rights, or should the department elect not to negotiate, it may
offer the project for open, competitive bidding without preferences. However, it should then not
violate the intellectual property rights of, or any confidentiality agreement with, the proposer.
In the seaport example, assume that the bid and tender documents were based on the unsolicited
proposal’s feasibility study. Assume also that three bids were received, including one from the
originator of the unsolicited proposal. The technical and other aspects of each of the three bids
were found to be acceptable, meaning that none of the bids was rejected on technical and
administrative grounds, as outlined in Chapter 5. This means that the preferred bidder will be
selected on the proposed schedule of payments to the government port authority. Table 9.1 below
summarises the bidders’ financial proposals and shows the net present value of the proposed
payment schedules using a discount rate of 18 per cent.

Table 9.1 Bidder proposals

Financial proposals Bidder 1 Bidder 2 Bidder 3
(Original proposer
of the project)
Fixed annual concession fee R1 500 000 R1 750 000 R900 000
Average fee payable per container R7,75 R7,00 R8,70
Net present value R74,4 million R67,2 million R79,5 million

As the table shows, the original proposer’s financial offer is the same as the one in the feasibility
study. Bidder 2’s proposal promises a higher annual flat payment of R1,75 million but a lower fee
of R7,00 per container. Bidder 3 proposes a lower annual flat payment of R900 000 but a higher
payment of R8,75 per container. However, Bidder 3 has the highest discounted present value of
payments to the port authority and has prima facie submitted the best bid.

Option 1
If the authority had selected Option 1, granting a preference equivalent to the value of the
feasibility study, the results of the bidding process would be adjusted as illustrated in Table 9.2.

Table 9.2 Adjusted results, Option 1

Financial offer Bidder 1 Bidder 2 Bidder 3
Net present value (R m) 74,4 67,2 79,5
Value of preference (R m) 12,0 0,0 0,0
Adjusted net present value after application of preference 86,4 67,2 79,5

After applying the preference, Bidder 1 has the highest net present value of payments to the port
authority and is recommended to be awarded the contract.

Option 2
If the port authority had selected Option 2, namely purchasing the feasibility study from the
original project proposer, the initial ranking of the bids would be retained. Bidder 3 would win in
this case because of the higher net present value of R79,5 million (as against Bidder 1 at
R74,4 million). In either of the options, the net cost to the port authority is the same.

43
Guidelines for Public-Private Partnerships

Other matters
Unsolicited proposals pose various difficulties, necessitating open and transparent dealings that
focus on value for money. While the Treasury Regulations allow the use of rewards and a
preference for a genuinely innovative unsolicited proposal, most unsolicited proposals fail this test.
Simply being the first party to propose a project on an unsolicited basis does not constitute
sufficient grounds for any preference or reward. Genuine effort, reasoned analysis and a
demonstrated appreciation of the requirements of the Treasury Regulations should be the
minimum considerations before a department even entertains an unsolicited proposal, let alone
provides any rewards or incentives.
Moreover, where a department provides a preference or reward for a valid unsolicited proposal, the
cost of purchasing any intellectual property should be included as part of total project cost as set
out in Treasury Regulation 6(2)(b). In other words, the cost of preferences and rewards becomes
an integral part of the value-for-money and affordability assessment of the project.

Conclusion
Unsolicited proposals can add initiative to the activities of a department, and it is therefore in a
department’s interest to reward genuine innovation. In putting the proposal out for tender,
however, government departments must ensure that the proposed project will really add value and
that bidding is fair and competitive.

44
 10
Conclusion
These Guidelines build on the Treasury Regulations that were prepared in terms of the Public
Finance Management Act of 1999, and on the Strategic Framework for Delivering Public Services
through Public-Private Partnerships. They are targeted at national and provincial government
officials involved in PPPs in public service delivery and in infrastructure development. The
Guidelines aim to ensure a structured approach to PPPs, by guiding departments in applying the
Treasury Regulations. The chapters follow the general sequence of a PPP transaction.
The government supports PPPs only if they ensure better value for money in the use of public
finances and secure effective and sustainable service delivery. This requires PPP projects that are
affordable and extend services without jeopardising the government’s fiscal position, thereby
allowing the government to focus on other strategic needs. To assist departments in securing these
outcomes, the Guidelines set out processes and key steps for each phase of the PPP life cycle.
Critical success factors are addressed – dealing with unsolicited bids, specifying outputs to
encourage private sector innovation, ensuring commercial interest, addressing the legal
requirements, constituting the project team and setting timetables. A checklist for these criteria is
presented in Box 10.1 below.
As noted, the Guidelines will be expanded on as the country gains more experience with PPPs. The
new PPP Unit in the national Treasury will develop additional guidelines and incorporate
comments and feedback from the users of this document.

Box 10.1 Criteria for assessing a PPP proposal: a checklist

1. Affordability
• Projected PPP service payments are identified.
• The project is affordable over the whole life of the contract, considering all existing and projected
revenues.
• A sensitivity analysis on costs and revenues identifies a range of possible outcomes.
• The relevant treasury accepts the affordability analysis and impact on budgets.

2. Output specification
• Requirements are specified in terms of service outputs, rather than particular assets or solutions.
• A range of ongoing services is included in the requirement of the contract.
• The specification is pitched at a justifiable level of service, given the client and consumer profiles.

3. Risk allocation
• The risk analysis and allocation deal with all foreseeable risks.
• Risk allocation transfers the principal design, building, financing and operational risks.
• The accounting officer considers the allocation of risks associated with usage, residual values,
technology, obsolescence, as well as with changes in legislation or regulation.

45
Guidelines for Public-Private Partnerships

4. Bankability
• There is evidence of commercial interest.
• A certain income stream is available to meet contract payments.

5. Essential terms and conditions

• The proposal follows guidelines and precedents for commercial and legal terms.
• It caters for major risks.

6. Comparators
• The public sector comparator (PSC) is prepared, except under exceptional circumstances.
• The PSC is based on an options appraisal that identifies alternatives to the PPP, with the “best”
alternative achieving the same outputs as the PPP specification.
• The PSC identifies the level of direct costs and risks.

7. Project team and advisers

• The team has project management experience and will undergo training where appropriate.
• It has an appropriate and affordable range of skills and experience.
• Advisers are willing to share lessons and approaches.
• Arrangements are in place for a periodic review of advisers’ performance.

8. Timetable
• The timetable covers all phases and provides for stakeholder consultation.
• The stages of procurement are kept to a minimum, consistent with achieving value for money.

9. Statutory processes
• The statutory processes are addressed, including planning permission or public enquiry.

46
 Bibliography

BIBLIOGRAPHY

BASANES, F., URIBE, E. & WILLIG, R. (Eds). 1999. Can privatisation deliver? Infrastructure
for Latin America. Washington: Johns Hopkins University Press.
CRANKO, P., GOTZ, G., HARRISON, K. & LATIF, S. 1999. Training policy and strategy.
Unpublished submission to the Department of Finance, Cape Town.
DEVELOPMENT BANK OF SOUTHERN AFRICA (DBSA). 1998. Infrastructure: a foundation
for development. Development Report. Midrand: DBSA.
ECONOMETRIX (in association with F. Fourie and P. Burger of the University of the Orange
Free State). 1999. The economic and fiscal impact of public-private partnerships. Unpublished.
FERREIRA, D. & KHATAMI, K. 1996. Financing private infrastructure in developing countries.
Discussion Paper No. 343. Washington, DC: World Bank.
FOX, J. & TOTT, N. 1999. The PFI handbook. Bristol: Jordan.
PALMER DEVELOPMENT GROUP. 1999. An audit of existing public-private partnership
arrangements in national and provincial government departments. Unpublished submission to the
Department of Finance, Randburg.
PFI TREASURY TASK FORCE. 1999. Standardisation of PFI contracts. London: Her Majesty’s
Treasury.
PRIVATE FINANCE TREASURY TASK FORCE (PFTTF). 1998. Partnerships for prosperity:
the private finance initiative. London: Her Majesty’s Treasury.
WORLD BANK. 1997. The private sector in infrastructure: strategy regulation and risk.
Washington, DC: World Bank.
WORLD BANK. 1999. Water competition and regulation. Washington, DC: World Bank.

47
 ANNEXURE I

PPP TRAINING PRODUCTS

49
 Annexure I: PPP training products

Introduction
A more detailed schedule of PPP training products in South Africa and internationally is available
from the Department of Finance. Training products that focus specifically on PPPs are limited and
hence, information on privatisation, alternative service delivery and community participation
training was included where relevant. The schedule details the target market as defined by the
training provider, the course title, the context of the course, logistical details, a summary of the
curricula and a narrative assessment.

PPP training in South Africa

While training on the transformation of the government emerged in the early nineties, focused PPP
training is fairly new. As with international developments, initial training efforts emerged from on-
the-job learning and through the support of consultants to the government. This includes the
support to pilot PPP projects provided by the Municipal Infrastructure Investment Unit (MIIU) in
the Development Bank and the short information workshops facilitated by the National Business
Initiative (NBI). Many of these were one-off programmes and are not captured in the schedule.
Among the first direct training interventions were specific donor-supported training products
delivered by the Institute for Public-Private Partnerships (IP3). IP3 provided focused short
programmes to the Departments of Constitutional Development (DCD) and Public Enterprises. IP3
is the largest international training institution that provides direct and focused training in PPP
training products. In addition to generic training products offered in Washington DC, IP3 develops
and delivers specialised in-house and in-country training products. In partnership with the DCD
and three historically disadvantaged universities, IP3 is providing three PPP training courses to
local government officials. In addition, with the support of USAID, IP3 has offered a PPP Train
the Trainer course at the University of Pretoria.
The Local Government Programme of the School of Public Management at the University of the
Witwatersrand developed the first formal certified course in PPPs. This was followed by the
development of an executive course in PPPs. As a follow-on, the University of Potchefstroom has
presented a short one-week PPP training programme.

PPP training products

As noted, training often lags the development of approaches, and the training products that focus
directly on PPPs are limited mainly to intensive training courses and short training courses. Other
forms of training are seldom publicised and are often specific to particular organisations. These
include on-the-job-mentorship and placements and tool kits as specific training forms. Only a few
of these programmes are formally examined and certified.
In addition to training products that focus directly on PPPs, other courses also address skills
building for the management of PPPs. These are either courses on infrastructure management,
sector programmes with substantial PPP information, or specialised programmes on particular
functional aspects of PPP management. These mainly address contract development, monitoring
and financial aspects of PPPs. Training programmes that focus on privatisation and community
participation often address aspects of PPP knowledge and skills, and are included in the schedule.
• Degree or higher diploma (long-term programme): These are formalised higher qualifications
offered by universities and other tertiary institutions. While a number of degree and higher
diploma programmes have a PPP orientation, only two programmes make direct reference to
PPPs. In both cases, the respective Master’s Programmes have electives that focus on PPPs.

51
Guidelines for Public-Private Partnerships

The University of Toronto in Canada and the University of the Witwatersrand’s School of
Public and Development Management have PPP electives on their local government Master’s
programme.
• Intensive training course: These courses are generally skills and competence oriented, range
from ten days to one month, and could be formally certified. The Graduate School of Public
and Development Management at the University of the Witwatersrand presented the first
intensive generic PPP training course in South Africa. IP3 presents similar intensive courses in
Washington. In addition, the Kennedy School of Government at Harvard offers an intensive
course on Municipal Infrastructure Management that focuses on PPPs. Other courses focus on
particular sectors (environment, water and infrastructure) and/or particular functional areas
(finance, contracts). These include courses offered by IP3 in Washington, the Kennedy School
of Government in Boston and the Universities of Florida and Birmingham.
• Short training courses/workshops: These focused skills-oriented courses or workshops range
between two and five days. IP3 has taken a lead in the development and delivery of such
courses. However, some consultancy companies are offering such short courses as part of their
overall support to the government on PPP projects. Deloitte and Touche has a unit dealing with
PPPs. In the United Kingdom, short PPP courses are presented by Price Waterhouse Coopers in
contract to the government. Many of these courses are tailored to particular departments and are
yet to be formalised.
• Information workshops: These workshops are directed at disseminating information on PPPs as
a concept and approach, and are generally presented by in-house and external PPP advocacy
units (such as the short programmes of the NBI). As they are context specific, these workshops
are easily generated and developed through the utilisation of existing capacity in the
government.
• On-the-job (placement and mentorship): These are seldom publicised, but are often highly
effective. Mentorships normally involve consultancy support to officials responsible for PPP
projects. Some consultancy interventions provide for specific PPP frameworks to be utilised on
future PPP projects, as well as skills transfer and mentorship. Placements can be effective but
are seldom publicised as specific training products.
• Tool kits: As tool kits can be distributed with relative ease, they are a popular form of training
and capacity development. They include manuals, generic contracts, software, etc. The United
Kingdom and Canada both have a web site with PPP guidelines and tools. However, because
tool kits are context specific, they have to be developed in-country and at times within
particular departments. The PPP manual of the NBI is one example of a PPP tool kit. Extensive
tool kits, which include generic contracts for PPPs, are used in Canada and the United
Kingdom. The World Bank has a PPP tool kit on the water sector.
Few of the intensive training courses build specialist PPP skills and the range of short training
courses and tool kits is limited. In the short run, tool kits and on-the-job training are the most
effective means of skills development. As on-the-job training is rarely recognised and is often
limited to individuals involved in PPPs, intensive training courses remain important, especially
where the demand for skills is high.
Currently, products with similar curriculum sets and objectives are provided over different periods
of time and by a range of individuals. As the National Qualification Framework evolves, the value
of particular training products will be determined through a quality assessment process. In the
absence of such a framework, the interactive contact time, learning methodologies, the skills of the
instructors and the reputation of the institution can serve as the framework for evaluating these
courses. A particular aspect to be developed is the use of local case studies.

52
 Annexure I: PPP training products

Training providers
Given the international shift from government training institutions to external training providers,
none of the PPP training providers was located in the government. In the main, universities, NGOs
and training units within larger consultant companies provide training. Internationally, the
following training providers are key players in the provision of PPP training:
• Institute for Public-Private Partnerships (IP3)
• John F Kennedy School of Government, Harvard University
• International Management Development Institute (IMDI), University of Pittsburgh
• Economic Development Institute of the World Bank
• International Law Institute
• International Training Centre of the International Labour Office (ILO)
• Public Utility Research Centre, University of Florida
• School of Public Policy, University of Birmingham
• Civil Service College (UK)

In South Africa, IP3 is a dominant actor in PPP training, delivering short generic products in
conjunction with local universities. These mainly focus on local government. IP3 has offered
specialist short workshops to particular departments. As noted, the School of Public and
Development Management at the University of the Witwatersrand offers an intensive, certified
PPP programme. In addition, the NBI offers short information/training workshops. With its direct
on-the-job support activities, the MIIU in the Development Bank also plays an important training
role. The South African Management Development Institute (Samdi), the government training
institute, has not yet been involved in PPP training. The Joint Universities Public Management
Trust (Jupmet) and similar consortiums are likely to be effective channels for facilitating the
increased involvement of universities as PPP training providers.
The limited range of PPP training providers in South Africa is likely to change as the momentum
for PPP increases and the demands for training grow. International training providers are likely to
play a key role in PPP training and support.

Conclusion
The limited range of PPP training providers and products reflects the time lag between the
development of the concept and the provision of training. The curriculum and content areas of PPP
training products are varied and often reflect specific contextually relevant areas. Most of the
current PPP programmes also tend to focus on local government and infrastructure, without much
attention being afforded to other potential PPPs. It is therefore essential to have interaction on
specific needs and how these can be accommodated within current training products.
While there is short-term capacity to provide PPP training, interaction with local training providers
and a partnership with international training providers would facilitate sustainable capacity among
training providers.

53
Guidelines for Public-Private Partnerships

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

1 Public-private Potchefstroom General/local

partnerships University for government
Higher Christian
Education *
2 Public-private School of General/local
partnerships Public and government
Development
Management, *
University of the
Witwatersrand
3 Public-private School of General/local
partnerships Public and government
Development
Management, *
University of the
Witwatersrand
4 Public-private National General
partnerships Business
Initiative (NBI)
*
5 Implementing Institute for Infrastructure
BOO and BOT Public-Private
infrastructure Partnerships
projects (IP3) *
6 Infrastructure Institute for Infrastructure
investments Public-Private
and financial Partnerships
analysis (IP3) in
collaboration *
with Hood
College (USA)

54
 Annexure I: PPP training products

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

7 The project life Institute for Infrastructure

cycle: ensuring Public-Private
quality procure- Partnerships
ment and (IP3)
management of *
infrastructure
services and
investments
8 Public-private Institute for Infrastructure
partnerships Public-Private
Partnerships
(IP3) *
9 Public-private Institute for Infrastructure
partnerships Public-Private
Partnerships
(IP3) *
10 Public-private Institute for Infrastructure
partnerships Public-Private
Partnerships
(IP3) *
11 Public-private Institute for General/local
partnerships Public-Private government
Partnerships
(IP3) *
12 Municipal Institute for General/local
services Public-Private government
partnership Partnerships
(IP3) *

55
Guidelines for Public-Private Partnerships

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

13 Municipal University of General/local

services Durban- government
partnership Westville
(partnership *
with IP3)
14 Municipal University of General/local
services Fort Hare government
partnership (partnership
with IP3) *
15 Municipal University of the General/local
services Western Cape government
partnership (partnership
with IP3) *
16 Private finance Price General
initiative Waterhouse
Coopers
*
17 Private finance Price General
initiative Waterhouse
Coopers
*
18 Private finance Price General
initiative Waterhouse
Coopers
*

56
 Annexure I: PPP training products

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

19 Infrastructure in John F Kennedy Infrastructure

a market School of
economy Government,
Harvard *
University
20 Privatisation, John F Kennedy General
regulatory School of
reform and Government,
corporate Harvard
*
governance University
21 Productive International General/local
partnerships in Management government
local Development
governance Institute (IMDI), *
University of
Pittsburgh
22 Building Economic Infrastructure
knowledge Development
expertise in Institute (EDI) of
infrastructure the World Bank *
finance
23 Private and Economic Pollution
public sector Development
collaboration for Institute (EDI) of
pollution the World Bank
management in *
Latin America
(via www)

57
Guidelines for Public-Private Partnerships

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

24 Regulation of Regulatory Transport

privatised Reform and
transport Private
services Enterprise
Division
(EDIRP), *
Economic
Development
Institute (EDI) of
the World Bank
25 Building Regulatory Infrastructure
knowledge and Reform and
expertise in Private
infrastructure Enterprise
finance Division
(EDIRP), *
Economic
Development
Institute (EDI) of
the World Bank
26 Global reform Regulatory Public
and Reform and enterprises
privatisation of Private
public Enterprise
enterprises Division
(EDIRP), *
Economic
Development
Institute (EDI) of
the World Bank
27 What a private World Bank Water
sector
participation
arrangement *
should cover

58
 Annexure I: PPP training products

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

28 Designing and World Bank Water

implementing
an option for
private sector
participation *
(water and
sanitation)
29 Selecting an World Bank Water
option for
private sector
participation *
30 Private finance International Infrastructure
of infrastructure Law Institute
(ILI)
*
31 Public International Public
enterprises: Law Institute enterprises
restructuring (ILI)
and *
privatisation
32 Private finance International Infrastructure
of infrastructure Law Institute
(ILI)
*
33 Negotiating and International Infrastructure
structuring BOO Law Institute
and BOT (ILI)
projects *

59
Guidelines for Public-Private Partnerships

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

34 Infrastructure International Infrastructure

finance: BOO Law Institute
and BOT (ILI)
projects *
35 Legal issues in International General/
privatisation Law Institute privatisation
(ILI)
*
36 International International General
project Law Institute
procurement (ILI)
and contact *
negotiation
37 Public sector Ciptanet General
reform International
programme:
improving
performance *
through
competition
38 Private sector International General
development Training Centre
and of the ILO
privatisation *
39 Procurement International General
management in Training Centre
the public of the ILO
sector (goods/ *
works/services)

60
 Annexure I: PPP training products

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

40 Works International Public works

procurement Training Centre
management of the ILO
*
41 Utility Public Utility Utilities
regulations Research
and strategy Centre,
University of *
Florida
42 Planning for Shaw Pittman General
public-private
partnerships
*
43 Governance School of Public General
partnerships Policy,
and poverty University of
Birmingham *
44 Managing School of Public General
contracting and Policy,
public and University of
private Birmingham *
partnerships
45 Private finance Civil Service General
initiative College (UK)
*

61
Guidelines for Public-Private Partnerships

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

46 Project, facilities Civil Service Construction

and services College (UK)
management
*
47 Management of Crown Agents General
projects
*
48 Advanced Crown Agents General
contract
management
(Part I: Tender
design, *
evaluation and
negotiation)
49 Advanced Crown Agents General
contract
management
*
50 Community Water, Water
management Engineering
urban services and Develop-
ment Centre
(WEDC),
Institute of *
Development
Engineering,
Loughborough
University

62
 Annexure I: PPP training products

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

51 Community Water, Water and

water supply Engineering sanitation
and sanitation and
Development
Centre
(WEDC), *
Institute of
Development
Engineering,
Loughborough
University
52 Privatisation Institute for General
and regulatory Development
policy Policy and
Management, *
University of
Manchester
53 Deteriorating United Nations Environment
urban Development
environment in Programme and
developing Yale University *
countries
54 Deteriorating United Nations Environment
urban Development
environment in Programme and
developing Yale University *
countries
55 Sources of Prospects General
investment International
capital and
privatisation *

63
Guidelines for Public-Private Partnerships

Training Institution Sector Degree/ Intensive Information Short training On-the-job On-the-job Tool kits
product diploma training workshop course placement mentorship
course

56 Project analysis United Nations General

and African Institute
management for Economic
Development *
and Planning
57 Enterprise Joint Vienna Public
restructuring Institute enterprises
and
development *
58 Enterprise Central and Public
privatisation Eastern enterprises
and European
restructuring Privatisation *
Network

64
 Annexure I: PPP training products

Institutions

Organisation Country Type Parent Address Telephone Fax E-mail Web site Contact
Centro de Estudios Economicos de Argentina University UADE Instituto de Economia, [Link] Martin Rodriguez
Regulacio UADE, Buenos Aires
Competitive Tendering and Contracting Australia University University of
Research Centre Sydney
Institute of Transport Studies Australia University University of
Sydney
Centre for Applied Economics Chile University University of Department of Industrial www-decon. Engel, Fischer &
Chile Engineering [Link]/ Galetovic
academic/areas.
htm
Fachhochschule für Wirtschaft Berlin Germany University Berlin Badensche Strasse 50-51, +49-30-8678264 +49-30-8678270 jmueller@[Link]- Jurgen Mueller
D 10825 Berlin [Link]
Department of Applied Social Studies Hong Kong University Hong Kong Hung Hom, Kowloon +852-2766-5730 +852-2773-6558 ssandy@polyu. Andy Fong Yik
Polytechnic [Link] Lam
University
School of Business Hong Kong University Hong Kong Kowloon Tong +852-2339-7548 +852-2339-5580 sktsang@hkbu. Tsang Shu-ki
Baptist [Link]
University
Mona Institute of Business Jamaica University University of Mona, Kingston 7, +1-809-927-2775 +1-809-977-4622 Cezley Sampson
the West Jamaica, W.I
Indies
African Economic Research Kenya Centre 8th Floor, International +254-2-228057 +254-2-219308 aerced@form- [Link].
Consortium House, PO Box 62882, [Link] com/aerc/
Nairobi
Centro de Investigacion y Docencia Mexico Centre 3655, Carretera Mexico- [Link] Juan Rosellon
Economicas Toluca, Mexico City,
01210
Institute for the Study of Competition New University Victoria PO Box 600, Victoria +64-4-462-5562 +64-4-462-5566 contact@[Link]. [Link]/
and Regulation Zealand University, University, Wellington, NZ nz [Link]
Wellington
Energy and Development Research South Africa University University of Private Bag, Rondebosch, +27-21-650-3230 +27-21-650-2830 energy@energtic. [Link].
Centre Cape Town 7701 [Link] [Link]/

65
Guidelines for Public-Private Partnerships

Organisation Country Type Parent Address Telephone Fax E-mail Web site Contact

Institute of Energy Studies South Africa University Rand PO Box 524, Auckland +27-11-489-2071 +27-11-489-3039 kk@[Link] [Link]/ K.D. Kotze
Afrikaans Park, 2006 english/academic
University /economic/
Institute of Government South Africa University University of PO Box 1153, King +27-4063-92445 +27-4063-92447 cris@[Link] C. Mosilili
Fort Hare Williams Town, 1153
National Business Initiative (NBI) South Africa Centre PO Box 294, Auckland +27-11-482-5100 +27-11-482-5507 info@[Link] [Link]
Park, 2006
Potchefstroom University for Higher South Africa University Potchef- Private Bag X60001,
Christian Education stroom Potchefstroom, 2531
University
School of Government South Africa University University of Private Bag X17, Bellville, +27-21-959-3190 +27-11-484-2729 ehamza@ems. E. Hamza
the Western 7535 [Link]
Cape
School of Public and Development South Africa University University of PO Box 601, Wits, 2050 +27-11-488-5700 +27-21-959-2209 gotzg@zeus.
Management the Wit- [Link]
watersrand
School of Public Policy and South Africa University University of Postnet, Suite 267, +27-31-204-4577 +27-31-204-4138 tressellan@dbn. T. Nayager
Development Management Durban- Musgrave, 4062 [Link]
Westville
Transport Economics South Africa University Rand PO Box 524, Auckland +27-11-489-2464 +27-11-489-2029 jw@[Link] [Link]/ J. Walters
Afrikaans Park, 2006 english/academic
University /economic/index.
htm
Dpto. de Analisis Economico Aplicado Spain University Las Palmas Campus de Tafira, 35017 +34-928-451800 +34-928-458183 lourdes@ Lourdes
de Gran empresariales. Castellano
Canaria [Link]
ILO International Training Centre Switzerland Centre International [Link]
Labour
Organisation
Eastern and Southern African Tanzania Centre Arusha, Tanzania n/a
Management Institute
Faculty of Economics Thailand University Thammasat Bangkok 10200, Thailand +66-2-221-6111 +66-2-224-9428 praipol@[Link]. Praipol Koomsup
University x2409 [Link]
Air Transport Management Group UK University Cranfield Building 115, Cranfield, +44-1234-754236 +44-1234-752207 [Link]. Frances
Bedfordshire, MK43 0AL uk/coa/tech- Creckenden
atm/[Link]
Centre for Energy, Petroleum and UK University University of Dundee, DD1 4HN +44-1382-344300 +44-1382-322578 [Link]@ Armando Zamora
Mineral Law and Research Dundee [Link]

66
 Annexure I: PPP training products

Organisation Country Type Parent Address Telephone Fax E-mail Web site Contact
Centre for Management under UK University Warwick University of Warwick, +44-1203-524506 +44-1203-524965 catherine. [Link]. Catherine
Regulation Business Coventry, CV4 7AL waddams@ [Link]/ Waddams
School [Link] cmur/
Centre for Market and Public UK University Bristol Mary Paley Building, 12 +44-227-954- +44-117-954- cmpo- [Link]/ Paul Grout
Organisation University Priory Road, Bristol, BS8 6943 6997 office@[Link]. depts/cmpo/
LTN uk
Centre for Research into Economics UK University London Houghton Street, London, +44-171-955- +44-171-460- crefsa@[Link] Jonathan Leape
and Finance in Southern Africa School of WC2A 2AE 7280 1769
Economics
Centre for the Study of African UK University Oxford St Cross Building, Manor +44-1865-271084 +44-1865-271094 [Link]@ [Link]/
Economies University Road, Oxford, OX1 3UL [Link]. ~csaeinfo/
uk
Centre for the Study of Regulated UK University University of School of Management, +44-1225-826714 +44-1225-826473 mnspv@ [Link]/ Peter Vass
Industries Bath Bath, BA2 7AY management. departments/
[Link] management/cri.
htm
Civil Service College (UK) UK College
Crown Agents UK University St Nicholas Road, Surrey +44-181-6433311 +44-1817-700479 hrd@ www.
SM1 1EL [Link]. [Link]
uk
Department of Applied Economics UK University Cambridge [Link]. David Newberry
University uk/dae/regulate/
[Link]
Department of Economics UK University City Northampton Square, +44-171-477- +44-171-477- [Link]-jones [Link]/ Jean Pitt-Jones
University London, EC1V 0HB 8503 8580 @[Link] economics/
[Link]
Department of Economics UK University Brunel Martin Cave
University
European Regulatory Research UK University Queen Mary
Institute and
Westfield
College
Institute for Development Policy and UK University University of Crawford House, Precinct +44-1612-752800 +44-1612-738829 ipdm@[Link]
Management Manchester Centre, M13 9GH
Institute for Transport Studies UK University Leeds [Link]@its. [Link]. Margaret C. Bell
University [Link] uk

67
Guidelines for Public-Private Partnerships

Organisation Country Type Parent Address Telephone Fax E-mail Web site Contact

London School of Economics UK University Houghton Street, London, [Link]/

WC2A 2AE graduate/
programmes/328.
htm
Oxford Institute for Energy Studies UK Centre 57 Woodstock Road, +44-1865-311377 +44-1865-310527 energy@[Link] [Link]. Richard
Oxford, OX2 6FA .[Link] uk/energy/about. Hepworth
html
Regulatory Policy Research Centre UK University Hertford Oxford
College
School of Public Policy UK University University of Edgbaston, Birmingham, +44-1214-144969 +44-1214-144989 [Link]@bham. [Link]/ Y. Swain
Birmingham B152TT [Link] intdev/
Science and Technology Policy UK University University of Mantell Building, Falmer, +44-1273-686758 +44-1273-685865 [Link].
Research Sussex at Brighton, East Sussex, uk/spru/
Brighton BN1 9RF
Regulatory Policy Institute UK Centre 31/33 Westgate, Oxford, +44-1865-792858 +44-1865-241885 [Link]@ [Link]. George Yarrow
OX1 1NZ [Link] org
Water, Engineering and Development UK University Lough- Leichestershire, LE11 3TU +44-1509-222885 +44-1509-211079 wedc @[Link]. [Link]/
Centre (WEDC) borough uk departments/cv/
University wedc
Harvard Institute for International USA University Harvard 14 Story Street, +1-617-495-3482 +1-617-495-9786 pep@[Link] [Link].
Development University Cambridge, MA 02138, .edu edu/about/index.
USA html
International Management USA University University of
Development Institute (IMDI), Pittsburgh
University of Pittsburgh
Institute for Public-Private Partnerships USA Centre [Link]
Institute of Public Utilities and Network USA University Michigan 410 Eppley Center, East +1-517-355-1876 +1-517-355-1854 graym@pilot. [Link].
Industries State Lansing, MI 48824-1121 [Link] edu/ipu/frmain.
University htm
International Law Institute USA Centre +1-202-483-3036 +1-202-483-3029 [Link]
John F Kennedy School of Government USA University Harvard 14 Story Street, +1-617-495-0484 +1-617-495-0485 [Link]. Kathy Eckroad
University Cambridge, MA 02138, edu
USA
National Regulatory Research Institute USA University Ohio State [Link]-
University [Link]/about.
htm
Public Utility Research Centre USA University University of Gainesville, Fl 32611- +1-352-392-6148 +1-352-392-7796 purcecon@dale. [Link]/ Sanford Berg
Florida 7142 [Link] eco/purc

68
 Annexure I: PPP training products

Organisation Country Type Parent Address Telephone Fax E-mail Web site Contact

Texas Water Resources Institute USA University Texas A&M College Station, Texas +1-409-845-1851 +1-409-845-8554 twri@[Link] [Link].
University 77843-2118 edu/
System

69
 ANNEXURE II

DRAFT REQUEST FOR PROPOSALS

71
 Annexure II: Draft request for proposals

(Name of department)

REQUEST FOR PROPOSALS

FOR

ZEERUST TOLL ROAD

DESIGN,
CONSTRUCTION
AND OPERATIONS

PROPOSAL NUMBER ______

ISSUED ON _______________

73
 Annexure II: Draft request for proposals

(Name of department)

REQUEST FOR PROPOSALS

Zeerust Toll Road design, permitting, construction and operation

Contents

1 Conditions of proposals and instructions to proposers

1.1 General ......................................................................................................................... 77
1.2 Proposal period .............................................................................................................. 77
1.3 Pre-proposal meeting ...................................................................................................... 77
1.4 Representation or interpretation of documents .................................................................. 78
1.5 Required proposal information ........................................................................................ 78
1.6 Signatory requirements ................................................................................................... 78
1.7 Proof of general liability insurance .................................................................................. 78
1.8 Performance bond requirements ...................................................................................... 79
1.9 Proposer responsibilities ................................................................................................. 79

2 Background
2.1 General ......................................................................................................................... 79
2.2 Traffic flows .................................................................................................................. 79

3 Scope of services
3.1 General ......................................................................................................................... 79
3.2 Contractor responsibilities .............................................................................................. 80
3.3 Owner’s responsibilities ................................................................................................. 81

4 Proposal price format

4.1 General ......................................................................................................................... 81
4.2 Alternative I .................................................................................................................. 82
4.3 Alternative II ................................................................................................................. 82
4.4 Price fluctuation clause .................................................................................................. 82
4.5 Uncontrollable events ..................................................................................................... 83

5 Subcontractors .......................................................................................................... 83

6 Personnel
6.1 Competent labour ........................................................................................................... 83
6.2 Employee training .......................................................................................................... 83
6.3 Employee appearance .................................................................................................... 83
6.4 Conduct of contractor’s employees ................................................................................. 83

7 Conditions of contract
7.1 Arbitration during construction phase .............................................................................. 84
7.2 Arbitration during operation phase .................................................................................. 84
7.3 Termination during construction ..................................................................................... 84

75
Guidelines for Public-Private Partnerships

7.4 Termination dur ing operation ......................................................................................... 84

7.5 Indemnifications ............................................................................................................ 85
7.6 Owner’s representation ................................................................................................... 85
7.7 Contractor’s representation ............................................................................................. 85
7.8 Notices ......................................................................................................................... 85
7.9 Access to contractor’s facilities and records .................................................................... 86

Appendices
A Form of proposal ........................................................................................................... 64
B Subcontractor declaration ............................................................................................... 88
C Form of insurance .......................................................................................................... 89
D Site map ........................................................................................................................ 89
E Form of bonds ............................................................................................................... 89
F Design and build agreement ........................................................................................... 90
G Articles of agreement ..................................................................................................... 90
H Conceptual design drawings ........................................................................................... 92
I Confirmation of feasibility permit ................................................................................... 92
J Toll road operations plan ................................................................................................ 92
K Certificate of attendance, pre-proposal meeting ................................................................ 92

76
 Annexure II: Draft request for proposals

1. CONDITIONS OF PROPOSALS AND INSTRUCTIONS TO

PROPOSERS

1.1 GENERAL
Proposals from (pre-qualified) Proposers are invited by the (name of department), hereinafter
referred to as the Owner, for the design, construction and operation of the (new, existing) Zeerust
Toll Road. The selected Contractor shall perform the services as defined in the Proposal
Documents and Operating Plan.
All interested Proposers shall complete and submit two (2) copies of the attached Proposal Form
and related documents to: (name and address of department), prior to (X:00) p.m. local time, on
the ___ day of _______ 1999, at which time the Proposals will be publicly opened and recorded.
Proposal documents shall be enclosed in a plain sealed envelope clearly marked:
PROPOSAL NO.________ ZEERUST DESIGN, CONSTRUCTION AND OPERATION
All mailed Proposals should be sent by registered post to ensure delivery. Telephone, telegraph,
telex or facsimile Proposals will not be accepted.
All Proposals shall provide a detailed statement of qualifications, including a list of references.
Particular emphasis will be put on experience in solid waste handling, heavy equipment operation,
earth moving/excavation, and in securing all required financing for the design, construction and
operation of a toll road.
Each Proposal must be accompanied by a Proposal Security, in favour of the (name of
department), issued by an approved Insurance Company or Bank in the amount of (XX) per cent of
the Base Proposal Price.
The Owner may conduct personal interviews with selected Proposers. The Owner expects that
Proposers selected for interviews will make key personnel proposed to work on this project
available for such interviews.

1.2 PROPOSAL PERIOD

The Proposals shall remain valid for ninety (90) days from the final date for submission of
Proposals.
The Owner shall notify the accepted Proposer (if any) of such acceptance by letter written within
the ninety (90) day Proposal Period or such extension of the Proposal Period as mutually agreed to
by the Owner and Proposers, and said Proposer shall execute the formal Contract within thirty (30)
days of said acceptance letter.
The Owner shall not be bound to accept the lowest or any Proposal or to assign any reason for its
acceptance or rejection of any Proposal and in no case shall any Proposer be paid for any expense
incurred in the preparation of a Proposal.

1.3 PRE-PROPOSAL MEETING

A Pre-Proposal meeting will be held at (X:00) a.m. on __________________ at (location of
meeting) for the purpose of reviewing the Proposal Documents and answering any questions from
Proposers regarding the Scope of Work or any other aspect of the proposed work. (A tour of the
proposed site may be arranged at that time.) Minutes of the Pre-Proposal meeting reflecting any
questions posed by Proposers and the answers thereto will be provided to all attendees. Attendance

77
Guidelines for Public-Private Partnerships

at the Pre-Proposal meeting is mandatory, and a precondition to the consideration of any proposal.
A Certificate of Attendance will be provided to each attendee at the Pre-Proposal meeting, which
certificate must be attached as Appendix “K” to any proposal filed in response to this RFP.

1.4 REPRESENTATION OR INTERPRETATION OF DOCUMENTS

Representation or interpretation of Proposal Documents shall be done in writing by the Owner’s
representative. If during the Proposal Period, subsequent to the Pre-Proposal Meeting, the Owner
makes any interpretation, clarification or change in the Proposal Documents, the Owner will issue
a letter to all Proposers explaining the interpretation, clarification or change. The Proposer shall
acknowledge the receipt of such letter or letters in its submitted Proposal. Proposers may submit
questions or requests for interpretation of Proposal Documents, in writing, up to _______ days
from the date of submittal of the Proposal. Copies of all questions or requests for interpretation so
received will be provided to all attendees at the Pre-Proposal meeting, together with the answer(s)
and interpretation(s) rendered by the Owner’s representative.

1.5 REQUIRED PROPOSAL INFORMATION

Each Proposal shall contain the following information:
1. Proposer’s Company name, address, telephone number, and contact individual
2. Completed Proposal Form(s) – Appendix A
3. Proposal Surety – Appendix E
4. Statement of qualifications and list of references
5. Description of proposed equipment
6. Implementation Schedule
7. Subcontractor Declaration – Appendix B
8. Form of Intent for Performance Bond – Appendix E
9. Certificate of Attendance, Pre-Proposal Meeting – Appendix K

1.6 SIGNATORY REQUIREMENTS

Each Proposal shall be accompanied by an original cover letter committing the Proposer, if
selected, to carrying out the proposed work at the Proposal prices. These prices shall be valid for
ninety (90) days from the date of the Proposal. The cover letter must further state that all
information submitted in support of the Proposal is accurate. The cover letter must contain the
signature of a person authorised to commit the firm(s) to a Contract. All forms requiring signatures
shall be signed by the same individuals signing the cover letter.

1.7 PROOF OF GENERAL LIABILITY INSURANCE

The selected Contractor will be required to obtain liability insurance reflecting the limits and
conditions stated in Appendix C. Proof of insurance in the form of a Certificate of Insurance from
a liability insurance firm, authorised to issue liability insurance in the Republic of South Africa,
will be required within thirty (30) days of the notice of acceptance and prior to Contract signing,
whichever is less.

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1.8 PERFORMANCE BOND REQUIREMENTS

A Performance Bond, in the initial amount of (XX) per cent of the Base Proposal Price, shall be
required of the successful Proposer, executed by a surety company duly authorised to do business
in the Republic of South Africa, within thirty (30) days after the date of notification to the selected
Contractor by the Owner and his acceptance of the Proposal and, in any event, prior to Contract
signing.
The Performance Bond shall be executed for the first year of the Contract and shall be a condition
precedent to the execution of the Contract and any renewal thereof. A Performance Bond shall be
renewed annually for the work performed in each successive year of the Contract Term, adjusted
accordingly. The Performance Bond shall be in the amount of (XX) per cent of the yearly total sum
of the Contract in each year of the Contract Term.

1.9 PROPOSER RESPONSIBILITIES

All Proposers submitting Proposals for the proposed work are cautioned to review the Conceptual
Design included in Appendix H and the Confirmation of Feasibility Permit in Appendix I and
examine carefully the site and all conditions affecting the design, construction and operation of the
toll road and to acquaint themselves with the quantity and character of the materials to be handled
under the proposed work.
Submission of a Proposal shall be deemed conclusive evidence that the Proposer is fully
acquainted with and shall be fully responsible for any restrictions, constraints or any physical
difficulties within the site and the quality and character of the materials, including the solid waste,
to be handled under the proposed work, as of the date of Proposal submittal.

2. BACKGROUND
2.1 GENERAL
(Insert any background information leading up to the issuance of the Request for Proposals.)

2.2 TRAFFIC FLOWS

(Insert in this section the results of any feasibility studies, which have estimated or determined the
traffic flows expected. If there are seasonal fluctuations they should be defined here. If there is the
potential for any risks, this should be noted here. This section must establish an annual estimate,
the Base Annual Traffic Flow, which will be used to determine the annual Base Proposal Price for
comparing proposals and determining the performance security, which is a percentage of the
annual contract amount. If a monthly price basis is used, it is common practice to include unit price
adjustments should the annual flows be (XX) per cent more or less than the Base Annual Flows.
These add-on and deduct prices are intended to represent variable expenses incurred or not
incurred by the contractor.)

3. SCOPE OF SERVICES
3.1 GENERAL
(Include in this section a general description of the scope of work to be performed under the capital
improvements and the operations.)

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3.2 CONTRACTOR RESPONSIBILITIES

3.2.1 TOLL ROAD DESIGN
The Contractor shall be responsible for the final design, permitting and construction of the toll
road. The Contractor shall complete the Final Design of the toll road within ninety (90) days of
notice to proceed by the Owner. The Final Design shall be in accordance with Department of
Transport’s Minimum Requirements For Main Road Construction. As part of the preliminary
permitting process, the Owner has completed a Conceptual Design of the site, included in
Appendix H. The Contractor will be totally responsible for the design, construction and operation
of the toll road and is not bound to accept the Conceptual Design in whole or in part. If, however,
the Contractor deviates significantly from the Conceptual Design, the Contractor shall document
all such deviations in his design report and state the reasons for such deviations.
As a minimum, the Final Design shall include the following components:
1. Topographic Mapping: The design shall be based on topographic mapping having a minimum
of …
2. Construction Plan: The final toll road design shall include a construction plan showing detailed
steps to be taken in the course of construction (add any detailed planning requirements here),
including management of environmental impacts.
3. Construction Phasing: The Final Design shall include a design plan showing the construction
phases of the road. The plan shall include the initial construction phase and all subsequent
phases.
4. Initial Construction Phase: The initial construction phase (3- to 5-year capacity) shall be in
accordance with the construction phasing plan. The initial phase shall include (add
requirements).
5. Infrastructure Requirements: The Final Design shall include the following infrastructure
improvements:
• Access roads shall be constructed to standard engineering design values. They shall have a
minimum width of six (6) metres and extend from the main paved highway to connecting
roads.
• In similar vein as the reference to access roads, add other key requirements, including
provision for a maintenance facility and basic operating requirements.
6. Construction Schedule: The Final Design shall include a time schedule for construction of the
toll road.
7. Design Submission and Review: The Contractor shall submit the final toll road design within
ninety (90) days of notice to proceed. The Contractor shall not start construction of the toll road
until the design has been approved by the Owner and all applicable permits have been obtained.
The Owner shall review the design within thirty (30) days. The Owner may either approve the
Final Design, as submitted, or request changes in accordance with the above specifications. If
changes are requested, the Contractor shall revise and resubmit the Final Design within thirty
(30) days.

3.2.2 PERMITTING
The Owner has performed preliminary investigations of the proposed site and has obtained a
Confirmation of Feasibility Permit from the Department of Transport (DOT), which confirms that
the basic characteristics of the physical site are favourable for the construction and operation of the
proposed toll road. The Contractor shall be responsible for obtaining the final departmental
Operating Permit on behalf of the Owner. The Owner shall be the Permit Holder and the
Contractor shall be the Responsible Person as defined in Section 1.8 of the DOT’s Minimum

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Requirements. In this context, “permitting” shall include all work required to obtain the permit,
including environmental assessments and public participation not included in the Confirmation of
Feasibility Permit. The Contractor shall review the permitting process, and meet with the DOT to
assess the existing permit status and include with his Proposal an outline of all additional work
necessary to obtain the Final Operating Permit.
If the Final Operating Permit is not obtained within ninety (90) days from the approval of the Final
Design, the Owner shall evaluate the reasons why the permit was not issued and initiate one or
more of the following options:
• Grant a conditional extension of time for obtaining the Final Operating Permit.
• Terminate the Contract and reimburse the Contractor for his expenses incurred to date for the
Final Design.
• In the event of Contractor negligence in the failure to obtain the Final Operating Permit, the
Owner may terminate the Contract without reimbursement for the Final Design.
• Negotiate an increase in the Contract prices where the permit delay was due to circumstances
beyond his control and the Contractor can document the reasons for the price increase.

3.2.3 CONSTRUCTION
After approval of the Final Design by the Owner and receipt of all required permits, the Contractor
shall begin construction of infrastructure improvements and the initial construction phase. Upon
authorisation to proceed with construction, the Contractor shall complete construction of the first
phase within (XXX) days.

3.2.4 TOLL ROAD OPERATIONS

The work to be performed under this section of the Contract shall include the provision of all
labour equipment, supplies and related items to operate the new toll road, in accordance with the
Operations Plan, included as Appendix J to this document.

3.3 OWNER’S RESPONSIBILITIES

3.3.1 GENERAL
The Owner shall cooperate with the Contractor during the design, permitting, construction and
operating of the new toll road, providing access to all necessary documents and facilities. The
Owner shall be informed of all relevant meetings with regulatory officials and shall attend
meetings where the Owner’s input is required.

3.3.2 TIMELY REVIEWS

The Owner agrees to review designs, regulatory submissions, periodic reports and monthly
invoices in a timely manner.

4. PROPOSAL PRICE FORMAT

4.1 GENERAL
(Under this section, the format for submitting proposal prices is presented. There are several basic
alternatives and combinations of design/construction and operations pricing. For the purposes of
this model document we will assume two alternatives.)
Alternative I assumes that the Contract will be a lump sum payment for the design/build and a
monthly fixed fee for toll road operations. Since most of the Contractor’s fixed costs will occur in

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the construction phase, this alternative can have a shorter Contract Term of 3 to 5 years. This
alternative will include adjustments for traffic flows over and under the Base Monthly Flows.
Rather than included under one contract, as presented in this model, this alternative could be
structured as two separate contracts, one lump sum contract for design, permitting, financing and
construction, and a second monthly price contract for operation.
Alternative II assumes that all costs, including design, construction and operation are paid through
a unit price. Since the Contractor must capitalise costs over the Contract Term, the term must be
longer, 10 to 15 years, to avoid very high unit prices.

4.2 ALTERNATIVE I
Under Alternative I, Item IA, the Contractor shall be paid a lump sum amount for toll road design,
permitting and construction. Upon completion of the work, the Contractor shall request a final
Owner inspection of the work for compliance with the Contract plans and specifications. If the
work is approved by the Owner, a Certificate of Completion will be issued by the Owner. Payment
will be due and payable sixty (60) days after the Certificate of Completion is issued by the Owner.
Under Alternative I, Item 1B, the Contractor will be paid a lump sum per month for supplying all
labour, materials, equipment and all other items required for the operation of the proposed toll
road. This lump sum price per month is based on a Base Monthly Flow of (XX, XXX) units, plus or
minus (XX) per cent. The lump sum price bid for this item times twelve (12), plus Item 1A will
constitute the Base Proposal Price. The Contract Term under Alternative I will be five (5) years.
Under Item 1C, the Contractor will be paid an add-on amount in addition to Item 1B for each unit
using the toll road, within any month which exceeds the Base Monthly Flows by more than (XX)
per cent. This item is intended to compensate the Contractor for variable expenses actually
incurred by the contracting process such traffic flows, which exceed the estimated or expected
amount by an agreed-upon percentage.
Under Item 1D, an amount will be deducted from the monthly lump sum for each unit in any
month, which is less than Base Monthly Flows by more than (XX) per cent. This item is intended
to reduce payment to the Contractor representing actual reduction in variable costs due to flows
below the estimated amount.

4.3 ALTERNATIVE II
Under Alternative II, the Contractor will be paid a unit price per unit that utilises the road. The
price per unit shall include all the Contractor’s costs for design, permitting, construction and
operation of the toll road. The Contract Term under Alternative II will be 25 years. At the
conclusion of the 25-year term, the ownership of all fixed and mobile assets will rest with the
Owner.

4.4 PRICE FLUCTUATION CLAUSE

(This section may be revised to suit departmental policy.)
Due to the length of the operations portion of this Contract, the Contractor shall be entitled to an
adjustment of the Proposal Price due to fluctuations in the cost of any material or labour cost as a
result of increased customs duty, tax, currency exchange rates, minimum labour rates or any other
governmental action affecting Contract prices which are beyond the reasonable control of the
Contractor. Price fluctuations due to inflation will be considered on each yearly anniversary date of
the Contract signing. At least sixty (60) days prior to the Contract anniversary date, the Contractor
shall submit to the Owner his request for an increase in the Proposal Price due to inflation, to be

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effective during the next year of the Contract. All requests for inflation increases must be
supported by an accepted national price index or other valid documentation.

4.5 UNCONTROLLABLE EVENTS

If the Contractor is unable to perform his responsibility under the conditions of the Contract due to
circumstances beyond his control, which results in increased cost to the Contractor for overtime or
work on weekends, or other increased costs, the Contractor shall be reimbursed for said additional
cost. If the Contractor experiences an unforeseen and uncontrollable circumstance he shall give
immediate notice to the Owner, prior to incurring any additional cost, who shall review the notice
and direct the Contractor accordingly.

5. SUBCONTRACTORS
The Contractor may utilise the services of one or more subcontractors to perform the work
described in this document, up to 49 per cent of the total work. All subcontractors to be used for
this work must be declared using the format presented in Appendix B.

6. PERSONNEL
6.1 COMPETENT LABOUR
The Contractor shall use all diligence in arranging for sufficient and competent labour at all times
during the term of this Contract. Competent supervisory and managerial staff shall be employed to
oversee the toll road operations and to ensure that the services are performed as provided in the
Operating Plan.

6.2 EMPLOYEE TRAINING

The Contractor shall provide all hired staff with the appropriate training in the use of all
equipment, safety gear and uniforms. Training shall include (add any specifics that the department
may require).

6.3 EMPLOYEE APPEARANCE

The Contractor personnel shall be representing the Owner and the proposed programme. As such,
they shall be neatly dressed, well groomed, courteous, and knowledgeable about toll road
operations.

6.4 CONDUCT OF CONTRACTOR’S EMPLOYEES

The Contractor shall comply with existing local labour laws, regulations and labour standards. The
Contractor shall formulate and enforce an adequate safety programme with respect to all work
under this Contract, whether performed by the Contractor or subcontractors. The Contractor has
the Owner’s assurance of cooperation where the implementation of these safety measures requires
joint cooperation.
All Contractor and subcontractor employees shall at all times conduct themselves within the laws
of the Republic of South Africa.

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7. CONDITIONS OF CONTRACT
7.1 ARBITRATION DURING CONSTRUCTION PHASE
(To be provided by Owner.)

7.2 ARBITRATION DURING OPERATION PHASE

If any dispute or difference of any kind shall arise between the Owner and the Contractor in
connection with or arising out of the Contract or performance of the specified services, it shall in
the first place be fully documented in writing and negotiated amongst the two parties. If these
negotiations do not produce a settlement within thirty (30) days from the date of written notice of a
dispute or difference by either party, the matter shall be referred to arbitration. An arbitrator will
be selected from a list of candidates agreeable to both parties. The matter may be referred to
arbitration prior to expiration of thirty (30) days upon mutual consent of both parties.
If the dispute or difference involves payments to the Contractor, only that portion of the payment
which is in dispute shall be withheld during the arbitration period and all other payments due to the
Contractor shall be paid as stipulated under the payment provisions of this document. Submission
of a dispute or difference to arbitration shall not relieve the Contractor from his obligations to
perform the services as specified herein.
The said arbitrator(s) shall have full power to open up, review and revise any decision, opinion,
direction or valuation of either party, and neither party shall be limited in the proceedings before
the arbitrator to the evidence or arguments for the purpose of obtaining a decision. The decision of
the arbitrator shall be binding upon both parties.

7.3 TERMINATION DURING CONSTRUCTION

(To be provided by Owner.)

7.4 TERMINAT ION DURING OPERATION

7.4.1 BY OWNER FOR CAUSE
If at any time during the Contract Term, the Contractor is deemed by law unable to pay his debts
or enters into voluntary or involuntary bankruptcy, liquidation or dissolution, or without
reasonable excuse has failed to perform the services required under the Contract, after due notice
and reasonable time to correct the area of non-performance, the Owner may issue a written
termination notice, terminating the Contract.
The termination notice shall set forth the conditions of termination, including the time of
termination and the disposition of equipment. The Owner shall have the option of purchasing the
Contractor’s equipment based on the fair market values as determined by a third party appraiser
agreed to by both parties. The time of termination may be a period of up to ninety (90) days to
allow the Owner to arrange for another contractor to perform the services. The Contractor shall
continue to provide services during the termination period and be paid as stipulated herein.

7.4.2 BY CONTRACTOR FOR CAUSE

If at any time during the Contract Term, the Owner is unable to make payments to the Contractor
or otherwise is unable to perform its obligations under the Contract without cause, after written
notice and reasonable time to correct said area of non-performance, the Contractor may upon
fourteen (14) days’ written notice terminate the Contract. Upon termination, the Contractor shall
be paid all sums that are payable to him for providing services under the Contract, plus damages
suffered by the Contractor due to the premature termination of the Contract.

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7.4.3 BY OWNER FOR CONVENIENCE

If at any time before the completion of the Contract Term it shall be found by the Owner that, for
reasons beyond the control of the parties, it is impossible or against the interest of the Owner to
continue the Contract, the Owner at any time, by ninety (90) days’ written notice to the Contractor,
may discontinue work and terminate the Contract in whole or in part. Upon service of such notice
of termination the Contractor shall discontinue to work in such manner, sequence and at such times
as the Owner may direct, continuing and doing after said notice only such work and only until such
time or times as the Owner may direct. The Contractor shall have no claim for damages for such
discontinuance or termination of the Contract, but the Contractor shall receive compensation for
reasonable expenses incurred in good faith for the performance of the Contract and for reasonable
expenses associated with termination of the Contract and remaining capital debt. The Owner will
determine the reasonableness of such expenses. The Contractor shall have no claim for anticipated
profits on the work thus terminated, nor any claim, except for the work actually performed at the
time of complete discontinuance, and his outstanding debt for capital financing.

7.5 INDEMNIFICATIONS
The Contractor shall indemnify, protect and save harmless the Owner against all losses and claims
for death of or injury to any person, or loss or damage to any property, which may arise out of or in
the consequence of the Contractor’s performance under this Contract, except those that are due to
wilful or negligent acts, or omissions by the Owner.
The Owner shall indemnify, protect and save harmless the Contractor against all losses and claims
for death of or personal injury to any person, or loss or damage to any property which may arise
out of or in the consequence of the Owner’s obligations under this Contract, except those that are
due to the wilful or negligent acts or omissions of the Contractor.

7.6 OWNER’S REPRESENTATION

The Owner’s authorised representative shall be the Director-General who may, in whole or in part,
delegate such authority to one or more persons appointed to carry out such duties and exercise
such authority as may be delegated by the Director-General. The Owner will inform the
Contractor, on or before Contract signing, of the identity of the Owner’s representatives and will
outline their duties and authority to represent the Owner during the term of the Contract.

7.7 CONTRACTOR’S REPRESENTATION

The Contractor shall designate a representative, in writing, empowering said representative to bind
the Contractor with regard to all matters involving the implementation of the Contract. The
delegation authority of the Contractor’s Representative, if any, shall also be specified.

7.8 NOTICES
All notices, including payment requests, disputes and other correspondence given to the Owner
shall be sent by post, facsimile or delivered in person addressed to the Owner’s Representative. All
notices or instructions given to the Contractor by the Owner under the terms of the Contract, shall
be sent by post or facsimile to or left at the Contractor’s principal place of business or other such
address as the Contractor shall nominate for that purpose. (Usually these details are specified.
Since this is an RFP, it should be stated that the details will be set forth in the Contract. Cable and
telex are no longer in wide usage.)

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7.9 ACCESS TO CONTRACTOR’S FACILITIES AND RECORDS

Upon reasonable notification, the Owner shall have access to the Contractor’s offices, maintenance
depot, other facilities and records for the purpose of determining the Contractor’s compliance with
the Contract conditions.

APPENDIX A
(Name of department)

FORM OF PROPOSAL: TOLL ROAD CONSTRUCTION AND OPERATION

Director-General
(Name of department)
1. Having examined the written Scope of Services, the Appendices and the locations of the toll
road construction and toll road operations to be performed under the Toll Road Construction
and Operation Proposal, we offer to undertake the design construction and operation of the toll
road and perform the Services in conformity with the Scope of Work and Appendices for the
following Costs:
(Proposer shall enter Proposal Prices for all items in Alternatives I and II.)

ALTERNATIVE I
ITEM IA – NEW TOLL ROAD CONSTRUCTION: For supplying all labour, equipment and
supplies for the design, permitting and construction of the new toll road, as defined in Sections
…… …. …… for the lump sum price of:
_____________________________________________ (R ________________________ )
(Rand in words) (Lump sum)

ITEM IB – TOLL ROAD OPERATION: For supplying all labour, equipment and supplies for the
operation of the toll road in accordance with Item …. and the toll road Operations Plan in
Appendix J for the price per month of:
_____________________________________________ (R ________________________ )
(Rand per month in words) (Per month)

ITEM IC – ADD-ON PRICE: For supplying all labour, equipment and supplies for the operation
of the toll road in accordance with Item 3.2.4 and the Toll Road Operations Plan in Appendix J for
each unit of traffic handled in any month which is greater than the Base Monthly Flow by more
than (XX) per cent, an add-on price per unit of:
_____________________________________________ (R ________________________ )
(Rand per unit in words) (Per unit)

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ITEM ID – DEDUCT PRICE: For each unit of traffic processed in any month which is less than
the Base Monthly Flows by more than (XX) per cent, a deduct price per unit of:
_____________________________________________ (R ________________________ )
(Rand per unit in words) (Per unit)

BASE PROPOSAL PRICE – ALTERNATIVE I

ITEM IA R ________________________
ITEM IB (R ________________ ) × 12 months R ________________________
(per month)
BASE PROPOSAL PRICE R ________________________

ALTERNATIVE II
ITEM IIA – TOLL ROAD DESIGN, PERMITTING, CONSTRUCTION AND OPERATION: For
supplying all labour, equipment and supplies for the design, permitting, construction and operation
of the toll road in accordance with Items … …. …. …. and the Operations Plan in Appendix J for
the unit price of:
_____________________________________________ (R ________________________ )
(Rand per unit in words) (Per unit)

BASE PROPOSAL PRICE – ALTERNATIVE II

ITEM IIA ( ____________ ) × ( ______________ times p.a.) = R ________________________
(Rand per unit) (Base Annual Flows)

2. We acknowledge that this appendix, as well as Appendices B through K, form part of this
Proposal.
3. We undertake if our Proposal is accepted, to commence work in accordance with the Scope of
Work and the Implementation Schedule.
4. If our Proposal is accepted, we will within thirty (30) days execute the formal Contract
Agreement, obtain final commitment letters with regard to the financing, and obtain the
guarantee of a Bank or an acceptable Insurance Company (subject to your approval) to be
jointly and severally bound to the (name of department) in the sum of (XX) per cent of the
Proposal Cost for due performance of the Contract under the terms of a Performance Security
in the form appended hereto. (Note: This clause would only be applicable if the contract
includes provisions for the financing; our model contract above does not.)
5. We agree to abide by this Proposal for the period of ninety (90) days from the date fixed for
receiving the same and it shall remain binding upon us and may be accepted at any time before
the expiration of that period, or such other extended period that may be agreed between
ourselves and the (name of department).

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6. Unless and until a formal Agreement is prepared and executed, this Proposal with our written
acceptance shall constitute a binding Contract between us, and shall be deemed for all purposes
to be the Contract Agreement.
7. We understand that you are not bound to accept the lowest or any Proposal you may receive,
that you may not give any reason for not accepting any Proposal, and that you will not defray
any expenses incurred by us in preparing and submitting this Proposal.

DATED this _________ day of ___________ 19__________

SIGNATURE: _____________________________________________________________
(Name of Signatory Printed):
_________________________________________________________________________

In the Capacity of: __________________________________________________________

Duly authorised to sign Proposals for and on behalf of: ________________________________
ADDRESS: _______________________________________________________________
SIGNATURE OF WITNESS: __________________________________________________
ADDRESS: _______________________________________________________________

APPENDIX B
SUBCONTRACTOR DECLARATION
If the Proposer wishes to subcontract any portion of the work described in the Scope of Work
under any heading, he shall be free to do so but must give full details of the subcontractors he
intends to employ for each portion of the work. The Contractor shall be responsible for ensuring
that each subcontractor maintains insurance as defined in Appendix C or that all subcontractors are
covered under the prime Contractor’s insurance policy.
Failure to declare subcontractor information may invalidate the Proposal.
1. Portion of the work: ______________________________________________________
i. Subcontractor: __________________________________________________________
Address: ______________________________________________________________
ii. Experience in similar work: ________________________________________________
2. Portion of the work: ______________________________________________________
i. Subcontractor: __________________________________________________________
Address: ______________________________________________________________
ii. Experience in similar work: ________________________________________________

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Signature: __________________________________ Date: ____________________________

Name of Signatory: _________________________________________________________
In the Capacity of: __________________________________________________________
Duly Authorised on behalf of: __________________________________________________

APPENDIX C
FORM OF INSURANCE
The selected Proposer shall be required to obtain general liability insurance as a condition of
Contract signing within thirty (30) days of notice of award. All subcontractors shall carry
insurance to the limits stated below or be covered under the prime contractor insurance. The
selected Proposer shall provide an Insurance Certificate at Contract signing as proof of insurance
coverage for the following amounts:
• For liability for bodily injury, including accidental death, RX XXX XXX on account of any one
occurrence, and RX XXX XXX aggregate limit.
• For liability for property damage, RX XXX XXX on account of any one occurrence and
RX XXX XXX aggregate limit.
The Contractor shall also be required to secure the following insurance:
1. Motor vehicle insurance on equipment and vehicles, owned or leased
2. Workmen’s Compensation Insurance

APPENDIX D
SITE MAP

APPENDIX E
FORM OF BONDS
(The Owner may include separate bond forms for the construction and operation phases where
applicable.)

We the undersigned _________________________________________________________

of ______________________________________________________________________
and _____________________________________________________________________
of ______________________________________________________________________

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do hereby bind ourselves as sureties in solidum and co-principal debtors for the due performance
of the Contract by the Contractor named therein, and for all losses, damages and expenses that may
be suffered or incurred by the Owner as a result of non-performance of the Contract by the
Contractor, renouncing all benefits from the legal exceptions ordinis seu excussionis et divisionis
“No value received” and all other exceptions which might or could be pleaded against the validity
of this guarantee, with the meaning and effect of which exceptions we declare ourselves to be fully
acquainted; provided that the liability of the undersigned under this guarantee is limited to and
shall not exceed:
_____________________________________________________ (R ______________________ )
(Rand in words)
and will lapse thirty (30) days after the conclusion of the Contract Term, unless the Sureties are
advised in writing by the Owner before the expiration of said thirty days of their intention to
institute claims and particulars thereof, in which event this guarantee shall remain in force until all
such claims are paid or settled.
FOR AND ON BEHALF OF THE SURETIES:
AT _______________________ on this _______ day of ____________ 19 _______

AS WITNESS:
1. _________________________________ 2. __________________________________

ADDRESS:
____________________________________ ___________________________________
____________________________________ ___________________________________

APPENDIX F
DESIGN AND BUILD AGREEMENT

APPENDIX G
ARTICLES OF AGREEMENT FOR TOLL ROAD OPERATIONS MADE
AND ENTERED INTO BY AND BETWEEN:
(Name of department)
(hereinafter called the Owner)
of the one part and __________________________________________________________
(hereinafter called the Contractor)

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WHEREAS the Owner is desirous to provide private toll road operation of the Zeerust Toll Road;
in accordance with that certain Tender Document entitled “Request for Proposals for
______________” issued by Owner on or about ________ 1999;
AND has caused documents describing the toll road operation to be prepared;
AND WHEREAS the said documents entitled, “Toll Road Operating Plan” and “Tender for Toll
Road Operation”;
AND WHEREAS the Contractor has executed by signature the Tender Documents and entered
Proposal costs to perform the described services on the Form of Proposal;
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. For the consideration as set forth by the Contractor in the Form of Proposal, Appendix A, the
Contractor will upon and subject to the Conditions annexed hereto, execute and perform the
services in accordance with the above referenced documents.
2. The Owner will pay the Contractor the sum of payments as provided in the Form of Proposal,
in accordance with the payment provisions included in the Proposal documents, hereinafter
referred to as the Contract Sum.
3. The Term of this Agreement shall be for a period of (years in words) (X) years, with adjustment
and escalation of the Contract Sum as stipulated in the Proposal Documents.
4. This Agreement may be extended beyond the initial (years in words) (X) year term at the
Owner’s option subject to negotiation of the Contract Sum, satisfactory performance by the
Contractor and availability of funds.
5. This Agreement may be terminated by the Owner, without notice, for cause as a result of non-
performance of this Agreement or non-compliance with local or national regulations. In the
event of termination for cause, the Contractor shall reimburse the Owner for any reasonable
increased costs incurred in arranging for alternate operations services.
6. This Agreement and its performance shall be construed and governed in accordance with the
Laws, Acts and Regulations of the Republic of South Africa.
This Agreement represents the entire Agreement of the parties hereto and supersedes all prior
negotiations, representations or agreements either written or oral. This Agreement may be
amended only in writing signed by both the Owner and the Contractor. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
SIGNED BY THE CONTRACTOR: _____________________________________________
ADDRESS: _______________________________________________________________
on this the ____________ day of _______________ 19__________
at ________________________ in the presence of the undersigned witnesses.

AS WITNESS:
1. _________________________ ADDRESS: __________________________________
2. _________________________ ADDRESS: __________________________________

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Guidelines for Public-Private Partnerships

SIGNED BY THE OWNER: ___________________________________________________

on this the ____________ day of _______________ 19__________
at ________________________ in the presence of the undersigned witnesses.

AS WITNESS:
1. __________________________ ADDRESS: __________________________________
2. __________________________ ADDRESS: __________________________________

APPENDIX H
CONCEPTUAL DESIGN DRAWINGS

APPENDIX I
CONFIRMATION OF FEASIBILITY PERMIT

APPENDIX J
TOLL ROAD OPERATIONS PLAN

APPENDIX K
CERTIFICATE OF ATTENDANCE, PRE-PROPOSAL MEETING
(To be attached by Proposer.)

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