The role of a transaction advisor generally concludes with the successful commercial or financial close of a PPP project. But the reality is, this is just when the transaction itself starts to come to life—the challenges of construction and operation are still down the road, the contract management and supervision have yet to present their own set of challenges. Yet the work of the transaction advisors is done and they are off to their next role. Sometimes, further down that road comes a question that prompts an assessment and a reflective look towards the past: Did the project deliver on its initial promise and intentions, and what data supports that conclusion?
That question is increasingly asked by NGOs, the public, donors, and stakeholders. Challenging as it may be, finding an answer to that question is imperative for transparency, openness, and accountability. But it is equally important from an operational point of view, because answers—especially answers that are based on solid data—can improve the quality of recommendations by transaction advisors and strengthen the sustainability of PPP projects.
Addressing assumptions first
A systematic answer to the question of whether or not the project delivered on its initial promise and intentions, and what data supports that conclusion, requires a purposeful comparison between the initial set of assumptions, targets, and projections and the actual results, usually several years after a project becomes operational. The challenges of revisiting a project years after a transaction advisory assignment concludes are not insignificant. Often the regional government champions and counterparts have departed and the client connection and relationship needs to be reestablished. Without it, access to interviews and data is going to be much harder.
Not surprisingly, political sensitivities around a project can also affect the willingness of public officials to discuss issues and difficulties of contract management. The private operators are sometimes interested in telling their story, but that is by no means certain.
In the cases where they are happy to share their experience working with the government and the operational challenges they encounter, the conversation becomes slightly more fraught when the question of data is brought up. To have a reasonable grasp of the achievements of a project one would need the latest data (for example, number of connections; improvement in road quality; passenger traffic) and compare that with projections made at the time of commercial close.
However, private operators are wary of sharing operational data with a third party, so concerns for publicizing commercially sensitive information often have to be balanced with assurances of non-disclosure. Even in those cases, the private counterpart is under no obligation to share the data with the transaction advisor. The framework for disclosure in PPP projects currently drafted by the World Bank Group’s PPP Group can help alleviate some of these issues, and can potentially provide a common set of practices that build a solid foundation for transparency and learning.
Why demand data?
Despite the challenges outlined above, the data we may gather from a short fact-finding mission is important and useful, and not only for a development institution with a mandate and a duty towards its member countries and their public. I’d like to address other things we can learn from the data, and how we can apply that knowledge.
Given a sufficient collection of post-monitoring data for a given sector, a transaction advisor can use it to enhance the quality of their financial models, to improve the projections around timing of post commercial close stages, and in general to provide a realistic check on assumptions. A systematic tracking of the frequency of specific issues—delays in payments, the need and frequency of contract renegotiation, an overwhelming initial demand, the need to establish sometimes expensive baselines—can yield precious lessons for further improvements in the delivery of transaction advice.
From the perspective of a development institution, more information on actual results will allow better targeting and tighter links between the promises of developmental impact and the realization of such impacts. Post-implementation data on beneficiaries of PPPs and on the realized benefits to governments can help clarify the case and conditions behind the development value of PPPs. Both donors and the public will be better informed and convinced by actual data on beneficiaries rather than reliance on a blank assumption that all infrastructure is good by definition.
A key and possibly under-researched area regards the demonstration effects of PPPs; post-completion evaluations can and should provide more insight in that area. In general, understanding the propagation mechanisms by which a solar power PPP project in an Indian state catalyzes similar projects elsewhere can yield important lessons into how and why certain types of projects manage to provide a catalytic spark within a country or a region.
The catalytic rationale is also central to IFC’s mission. Post-completion project monitoring can help us have a more disciplined approach in discovering and documenting the demonstration/catalytic mechanisms, especially in the cases where the explicit goal of our engagement is to spur additional inflows of foreign or domestic private capital in a sector.
Data can boost post-transaction support
Finding out how a project develops after commercial close is not just about story telling. Understanding what happens after commercial and financial close can also result in more tailored advice and products. IFC’s experience with clients allows it to better understand the difficulties clients may face in the immediate post-completion stages of a project. As a consequence, IFC introduced post-transaction advisory support as a new product several years ago. While the choice of such engagements is judicious, during the past couple of years it has emerged as a much needed and successful addition to the regular transaction services we provide to our clients, for example in Bhutan and India.
As we track the explosion of Big Data throughout society, and contribute to important discussions about the potential of these numbers to transform our understanding of the world, we continue to examine the promise of post-transaction data to contribute to more efficient, effective PPPs. We have made significant steps toward accumulating a body of post-transaction knowledge and feeding it back into operations and donor reporting, but the practice of post-transaction monitoring and reporting of actual results has much more to offer us, our government clients, and the people around the world who benefit from these PPPs.