Role of managers in PPP’s urban infrastructure provision

INADEQUATE infrastructure provision and maintenance has been a bane of the Nigerian economy for several decades; and this challenge has been perennially rooted in shortfalls in budgetary allocations for infrastructure financing. Public-Private Partnerships (PPPs) have thus emerged as alternative models in infrastructure financing to rescue the ailing stock of infrastructure in Nigeria, especially in urban centres. Various PPP models have been used in several sectors including housing delivery, land development, energy, roads and other transport infrastructure. Implementing PPP models in Nigeria has however not been without challenges and this is linked to lack of professionalism in design and implementation procedures. This paper therefore advocates the need for urban managers (estate valuers, lawyers and city planners among others) to play clearly defined roles in identification, procurement and implementation of urban infrastructure projects under PPP arrangements. The need to deliver professional capacity along these lines and their roles in ensuring ethical practices and procedures are discussed.

 

What is public-private partnership (PPP)?      

PPP has been defined as a contractual arrangement which is formed between public and private sector partners which involves the private sector in the development, financing, ownership and or operation of a public facility or service (Ogunsanmi, 2014). PPP allows for the finance and operational burden to be transferred from the public to the private sector. In return government is able to focus on strategic areas like regulation, policy making, planning and demand risk. This is important as governments have better leverage on demand through attractive policies. Governments are known to be better managers of such risk and control it more effectively (KMPG, 2007), while private sector operators are known for better efficiency in service delivery.

 

Public Private Partnership models

Service contract: This involves the government and the private sector where the rights and obligation to perform a specific service within well-defined specifications and period are awarded by the government to the private sector. Government continues to take possession of and control of all facilities, capital assets and properties.

Management contract: Operational control transferred to a private party who is generally not expected to invest in the facility.

Lease: Where the private party manages and operates an existing public facility and pays a specified lease payment to the government. In Lease Contract, the private investors build the infrastructure and lease it to government under finance or operating lease. The facility may return to the public sector at the end of the contract period or may remain under private ownership.

Concessions: Where the private partner has total control over the management and operation of the facilities, often on a long-term basis, this is one of the most popular models of PPP operating in Nigeria.

Concessions may take the form of Build-operate-transfer (BOT). The BOT model often has the challenge of construction risk, operating risk, social, and environmental risk. In this outsourcing model, the private company might handle an aspect of service, such as billing, metering, transport, or even cleaning. Management contract and lease contracts involve a private entity taking over the management of a State-Owned Enterprises (SOEs) for a given period although the facility continues to be owned by the public sector. The public sector retains the responsibility of financing the investments in fixed assets. In the case of management contracts, the public sector also finances working capital. In this concessionaire plan, it is 100 per cent Public sector owned. The challenge here is that of market risk, price risk and counterpart risk.

Also Concessions may take the form of Build- operate-own (BOO) or Build-own-operate-transfer (BOOT): In the BOO/BOOT model, the private partner has 100 percent ownership. The challenge here is that of regulatory risk, project risk and creeping taxation. Other concession models include: rehabilitate, operate and transfer (ROT), design-build-operate-transfer (DBOT), design-build, finance and operate (DBFO), build-operate-maintain (BOM), build, rent/lease and transfer (BRT or BLT) and, build transfer and operate (BTO).

Private Finance Initiative (PFI), a concept where the private-sector funds a particular project and operates it for an agreed period.

In conclusion, whatever model is adopted should make the benefit of citizens a top priority.

 

Sector specific infrastructure deficit challenges

Energy – Power Sector: This sector experiences a slow pace of reform particularly on the privatisation of Power Holding Company of Nigeria (PHCN). Power projects usually require long term debt funding at attractive rates due to their investment horizon and regulated nature of markets/tariffs. Due to its underlying liability structure and cost of funds, local debt funding are usually of short to medium term not matching tenor requirements for power projects. The investment of $18-20 billion has been proposed for the next six years while investment of $85 billion is required to achieve 20- 2020 target. With respect to Independent Power Projects (IPP), 15 out of the 27 IPPs with planned capacity of 8,539 MW are in project planning phases. These projects require investments worth $8.5 billion (Presidential Committee on Power Sector Reforms).

Power infrastructure challenges in Nigeria include: Non-Availability of long term financing (10-15 years) with competitive interest rates to enable investors explore opportunities in the sector;

Acquisition of Nigeria Independent Power Project assets for possible concessions (to be undertaken in the future) to refinance Government’s investment; Global credit and financial crisis limiting foreign investment in above opportunities; Local community unrest/hostility in the Niger Delta region impacting supply of gas; and Lack of pool of operations and maintenance personnel to manage projected increase capacity.

Energy – Oil and Gas: Refineries require adequate investments, however this will require long term financing with appropriate interest rates required to develop these opportunities. Some of the issues affecting investment in upstream gas infrastructure include the need to introduce appropriate fiscal incentives to encourage private sector investment, the absence of long term funding (local and offshore) at appropriate interest rates to fund required investments is equally challenging.

Transport – rail: The Federal Government has declared its commitment to continue to encourage investment in the rail sector. Although concessions of the narrow gauge were planned, constitutional bottlenecks have stalled the process, and investor confidence in the sector is therefore not as high. Federal Government is now to fully fund development of extensions to major ports ($178 million) as links to ports will generate traffic that will improve the viability of the concession with a commitment to fully rehabilitate and maintain projects with affordable 23 investment requirements to the tune of $98 million. It is expected that Federal Government will enhance the value of any concession arrangement. The main challenge with operating a PPP in the rail sector, relates to the Nigerian Railway Corporation Act which vests the railways solely and entirely in the Federal Government. This is a constitutional bottleneck that must be eased off before concessions can be considered. Railways are in fact amenable to concessions as demonstrated in other climes.

Transport – road:  Traditionally, road funding in Nigeria has been through conventional budgetary allocations, but this has often proved insufficient.

 

Roles of urban managers in infrastructure development

Urban management is a combination of all streams converging together to provide citizens with required services in essence putting all infrastructure in place. To understand urban management you have to understand the components of urban settlement which states that it’s not merely a set of road, buildings, parks etc. the core function of a city is to provide inhabitants a livable environment be it shelter, livelihood, entertainment, food and other services required for a healthy living.

Where economic offerings (basic infrastructure and services) are of no use, people will move to other cities, which leads to migration even when the infrastructure is not as good as those in the city they are living in.

Urban managers include estate surveyors, lawyers and town planners. These managers are involved in urban management they manage both land and landed properties. An urban manager therefore seeks to provide a suitable, comfortable and functional environment to the urban populace through the following basic roles; Planning, Operation, Maintenance

Planning: The urban manager plans for the provision of infrastructure in an urban environment by formulating a well detailed planned preventive maintenance policy to the government for managing public infrastructures/assets. They do this by planning for the infrastructure and their services. For example while planning for a transport route; the population to be served is also put into consideration. The urban manager co-ordinate between the two because their lifespan differs.

Operations: The urban manager ensures the infrastructures are put to work to suite the activities of the urban population. They help identify and establish the operative life span and renewal of the components parts that make up public infrastructure and assets. It is the goal of the urban manager to ensure the infrastructure effectively serves the needs of the population and isn’t just static but running and effective.

Maintenance: Infrastructure and their services have to be maintained and repaired regularly. The urban manager carries out continuous renovation and remedial works on the infrastructures provided. It is the role of the urban manager to ensure infrastructure is not left to decay.

 

Estate surveyors

The estate surveyor is not directly concerned with provision of these amenities and facilities rather he is a service provider. The roles played by estate surveyors in resolving infrastructure deficit challenges include; carrying out analytical evaluation of infrastructure gap at different levels of possible intervention, provision of critical assessment based on the professional integrity of estate surveyors, demand for accountability and results for all public investment in infrastructure.

 

Conclusion

This paper looked at infrastructure provision in the light of public private partnership with the main aim of defining the role of urban managers. We have been able to expose the inadequacies in the provision and maintenance of infrastructure, which has been causing misery and untold hardship to the Nigerian populace for many years past.  This challenge has been perennially rooted in shortfalls in budgetary allocations for infrastructure financing. Public-Private Partnerships (PPPs) have thus emerged as an alternative model in infrastructure financing to rescue the ailing stock of infrastructure in Nigeria, especially in urban centres. Various PPP models have been used in several sectors including housing delivery, land development, energy, roads and other transport infrastructure. Implementing PPP models in Nigeria has however not been without challenges and this is linked to lack of professionalism in design and implementation procedures. Therefore there is a very strong advocacy for urban managers (estate valuers, lawyers and city planners among others) to play clearly defined roles in identification, procurement and implementation of urban infrastructure projects under PPP arrangements. The need to deliver professional capacity along these lines and their roles in ensuring ethical practices and procedures are discussed.

  • Dr Adebukola Daramola is a Senior Research Fellow, Nigerian Institute of Social & Economic Research (NISER); Oluwaremilekun Onaeko is a Senior Associate, Nigerian Institution of Estate Surveyors and Valuers.

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