The problem of political leaders’ pursuit of self-interest rather than the common good is as old as politics itself. Both Plato and Aristotle explored this in depth, making similar points that the one element shared among ideal regimes with wise and virtuous rulers is that they are governed in the common interest. Conversely, the leading characteristic that distinguishes deviant regimes from the ideal, philosophers and modern-day experts say, is that their rulers rule solely in their own interest.
The result, in their non-ideal world then and ours now, is injustice—and varying degrees of corruption. Artistotle believed this was not necessarily a moral failing, but more a matter of the institutional structures and social norms in place. In terms we’d use today, there’s a systemic, practical remedy to reduce corruption—or political or corporate self-interest that goes against the common good—and it’s called transparency.
Transparency is a high priority for public-private partnerships (PPPs), which involve government officials and corporate leaders in high-stakes deals. Definitions of PPPs vary, but the details remain the same, best captured by this description: “A PPP is a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance.”
PPP contracts, and the multi-million dollar financing agreements behind them, are powerful tools that governments can use to leverage private sector knowledge, experience, and financing capacity to improve the volume and quality of basic services provided to local populations. Many successful PPPs have a high level of transparency during the procurement phase, but so far there’s been no widely-accepted framework for the sort of disclosure process that a PPP should follow during the pre- and post-procurement phases, and very little written about guidelines for transparent PPPs that would apply to the majority of these deals, which are growing in number around the world.
There’s a systemic, practical remedy to reduce corruption—or political or corporate self-interest that goes against the common good—and it’s called transparency.
Although there is a dearth of literature on PPP disclosure policy and practice and a wide gap among practitioners in understanding the mechanics of disclosure, its role in providing critical data for PPPs’ success is more important than ever. The Framework for Disclosure in PPPs (“the Framework”) offered here outlines a new way forward. With this Framework in place, data that’s critical to the success of a PPP while it is still in progress, and data that is important to factor into planning for future PPPs, can be generated and standardized for the benefit of infrastructure partnerships worldwide. The problem may be an old one, but this guidance leads us to new and promising solutions.
The Framework outlined here has been designed based on the key drivers of disclosure, major factors influencing the drivers, the challenges and benefits, the uses and various categories of users of information and risk sharing mechanisms within contracts.
The World Bank Group’s consultations with stakeholders suggests that there are multiple interconnected key drivers, such as a desire to mobilize private capital for investment, increasing public confidence in projects, achieving better value for money, and reducing the risk of corruption. Key issues underlying these are extent of alignment of private investments with public interest, standards in the delivery of services, predictability around pipelines, a level playing field for bidders, and objective criteria for evaluating bids, among others.
More direct factors appear to be the wider government policy on transparency and whether there is supportive legislation. An inference that can be drawn is that good practice may be associated with the existence of legislation supporting disclosure, identified as Freedom of Information or Public-Private Partnerships, Public Financial Management, sector specific and/or budget transparency legislation. Where legislation mandates proactive disclosure, more information seems to be available in the public domain. Another inference is that practice relating to PPP disclosure may have developed more rapidly in emerging countries because of an imperative to create new infrastructure.
Levels of Disclosure
It may not be practical to assume that jurisdictions with varying capacities can easily achieve the recommended level of disclosure. There could be several supply side hurdles. In addition, while FOI Acts usually place the responsibility of disclosing information on the public sector, in the case of PPP projects the public sector on its own cannot provide all the required information and has to be aided and assisted by the private sector. Clauses on how information will be collected and disclosed need to be included in contracts. In addition, in some situations, it might be essential to enhance the capacity of the public and private sectors to enable them to work together to disclose information.
While standard clauses and methodologies to handle information will be useful, these may not fully take care of capacity issues. Given these limitations, the Framework suggests a graded level of disclosure, with two intermediate levels prior to graduating to full disclosure for countries with capacity issues as follows:
- For countries with low capacity: Countries with low capacity and resources should aim for partial disclosure comprising the following: basic project information, procurement information along with disclosure of the RFQ and RFP documents; and information on government support. Another option is to disclose the full PPP contract with its schedules in the public domain. Disclosing full contract documents would mean a fairly high level of disclosure without a high level of skills. Care must, however, be taken to redact confidential clauses before disclosure.
- For countries with intermediate or moderate capacity: It is recommended that in addition to disclosure as recommended for countries with low capacity, moderate capacity countries should also attempt to disclose information on tariffs, service, and fulfillment of the Key Performance Indicator targets. This would ensure that the public gets headline information on the basic characteristics of the project, the level of tax payer money going into the project, the rationale underlying the tariff levels, and the expected services.
Role of Strategic Communication
Key challenges facing disclosure appear to be the reluctance of public bodies to share information in the absence of a clear mandate, a dearth of practical guidance, non-availability/inaccuracy of data, time and costs, and lack of oversight mechanisms. Sometimes, even disclosed information becomes inaccessible, especially where it consists in disclosing complex difficult to comprehend full contract documents. A disconnect between the objectives of disclosure and the policies used is another challenge. Not surprisingly, challenges such as increased litigation and consequent delays may also arise for governments feeding back into the general reluctance to disclose.
Given the longer term benefits such as greater accountability in expenditure, higher level of confidence in the fairness of the process and better quality of bids, among others, and the potential it opens up for formulation of improved policies and practice relating to PPP, it is essential that challenges are overcome by building the right frameworks for disclosure as well as by framing the discussion around disclosure through strategic communication with stakeholders.
It is important that strategic communication around projects and programs is formulated as an interactive process in order to ensure that feedback loops are completed, and the disclosed information is understood and used optimally by all stakeholders. Strategic communication entails placing the project in the right context, benchmarking it in terms of tariff (and cost), and services using available benchmarks; and discussing the pros and cons of different alternatives for providing service highlighting the relative advantages of the selected alternative. It is also important to frame the discussion around other key issues such as competition and confidentiality, which may be of concern to the private sector.
The recommended design is hierarchical including a logical framework which moves from a high-level mandate to disclose towards the basic elements of disclosure. A snapshot of the recommended features is included in the figure and table below. All of these features may not necessarily be needed in all jurisdictions. The United Kingdom is probably one of the few jurisdictions which have all of these features in their disclosure framework including a comprehensive chapter on information and disclosure in their standard PPP clauses.
Elements of a PPP Disclosure Framework
The Framework is recommended for use by jurisdictions with existing or potential PPP programs with suitable customization based on maturity of program, current status of disclosure, types of contract structures and payment mechanisms used, and public sector capacity. There is also scope for use of the Framework, specifically the Disclosure Diagnostic proposed within the Framework, in conjunction with wider open contracting transparency related tools such as the World Bank Group’s Scoping/Assessment Tool for Procurement Systems. In terms of future related work, the WBG proposes the extension of the Open Contracting Data Standard (OCDS) to PPP using the recommendations of this Framework.
The Framework will remain a work in progress and will be refined based on stakeholder feedback, implementation experience, and any significant changes in PPP structures and processes.
This article was excerpted from a forthcoming World Bank Group publication.