Conflict mngm’t mechanism eyed for hybrid PPP

As the government increasingly leans toward the use of the hybrid public private partnership (PPP) mode, the PPP center is urging the government to adopt a conflict management mechanism for builders and operations and maintenance (O&M) providers to prevent costly mishaps post-construction.

In a blog entry on the World Bank Group’s website, PPP Center executive director Ferdinand Pecson said the hybrid model of project financing and construction is ideal for the objective of delivering public service of required quality at the lowest cost.

The government is shunning the use of the traditional PPP mode for flagship infrastructure projects because of the considerable length of time involved from conception to implementation of the project.

In the past, protracted negotiations and disputes have also delayed the implementation of projects under PPP.

Under the hybrid PPP mode, the government would build and finance the infrastructure projects using public funds or cheap financing and later on auction off the O&M aspects to the private sector.

Pecson said the government should plan for conflict management between builder and developer as soon as the use of a hybrid model is made to prevent disruption of public service.

“Thus, the active management of this conflict between builder and O&M provider in a hybrid model has to be planned, as soon as a decision to go hybrid is made. Conflict management, if done postconstruction, could potentially entangle the government, the builder and the O&M provider in costly finger-pointing should problems in the infrastructure or in service delivery later arise. This is, in fact, already happening in some hybrid projects,” he said.

With this risk in mind, Pecson said the designated builder should work closely with the O&M provider during the construction phase.

“The hybrid model works if the infrastructure is built and equipped to enable the delivery of the services expected from the operations and maintenance (O&M) provider,” said Pecson.

“Bidding a project on the basis of lowest construction cost, without consideration for O&M, will not naturally result in such infrastructure. With airports, for example, if passenger congestion in queues at checkin counters or security checks are to be avoided, the number and arrangement of service counters have to be designed and built accordingly. Poor airport service could result in the O&M provider being replaced,” he added.