The Policy and Institutional Framework for the implementation of a PPP Programme for the Government of Jamaica (GoJ), The Policy defines a PPP as “a long-term procurement contract between the public and private sectors, in which the proficiency of each party is focused in designing, financing, building and operating an infrastructure project or providing a service, through the appropriate sharing of resources, risks and rewards.”
Cabinet approved the PPP Policy on September 18, 2012. It was tabled in Parliament on November 20, 2012, and became effective immediately.
The DBJ, which is currently designated as the GoJ’s Privatisation Secretariat, will be responsible for implementing the GOJ’s PPP Programme. To centralize management and coordination of the Programme, the Privatisation Division in the DBJ will be expanded into the Privatisation Agency and PPP Unit. The objective is to ensure that every PPP project is identified, developed/structured, evaluated and implemented through a uniformed and consistent process. This will be based on well-defined criteria focused on achieving optimal risk transfer, value for money and fiscal responsibilities.
The Ministry of Finance and Planning is responsible for the identification, evaluation and management of the fiscal implications of PPPs, to ensure that:
- The fiscal impact of PPP projects is consistent with the Government of Jamaica’s fiscal constraints, and that fiscal risks are identified, managed and accounted for appropriately;
- Economic, financial, and value for money assessments are done rigorously, and drive decision-making on PPPs;
- The Ministry of Finance and Planning is able to contribute quickly, comprehensively, and in a cohesive way on PPP issues, and to provide timely and complete advice to Cabinet and the Unit on these issues
The GoJ implemented the PPP Policy because of the lack of a central authority and consistent framework to guide the Government in administering the PPP development process.
All MDAs in Government are responsible for the identification of candidate PPP projects. MDAs are also to consider whether a PPP would be a good delivery method for any significant new assets they are planning to construct, or any new services they intend to deliver. MDAs will submit candidate projects to the PPP Unit, with all the information required for screening them.
The PPP must have benefits that exceed its costs, and be the least-cost practical way to achieve those benefits. It is by using PPPs – as opposed to conventional public procurement projects – that greater value for money will be achieved through:
- Risk Transfer
- Whole-of-life costing
- Asset utilization
- Focus on service delivery
- Predictability of costs and funding
- Mobilisation of additional funding
The PPP criteria are standards that a candidate project must meet to be developed and implemented as a PPP. There are four (4) main PPP criteria:
- Project is viable – The project makes sense, in that it is effective in meeting government objectives, technically and legally feasible, environmentally compliant, socially sustainable, and economically viable
- PPP achieves value for money – procuring the project as a PPP will provide greater net benefit than conventional public procurement
- PPP is marketable – there are qualified private parties available to do the project and the project is expected to provide a commercial rate of return sufficient to attract such parties and create competitive tension
- PPP is fiscally responsible – the project’s cost to Government is in line with fiscal priorities, and project risks retained by the Government would not be fiscally destabilizing.
Privatisation, in its most basic form, is the transfer of ownership, operation or control of management of state assets to the private sector. The definition for the development of Privatisation is outlined in The Policy Framework and Procedures Manual for the Privatisation of Government Assets: The Privatisation Policy. The Privatisation Policy is currently available to the public on the DBJ Website at http://dbankjm.com/services/ppp-and-privatisation-division/privatisation/privatisation-policy-framework-procedures-manual/
The terms ‘divestment’ and ‘privatisation’ when used are to be understood to include all the types of transactions in which Government-owned assets are transferred to private ownership in whole or part, including transfers by way of:
- Sale (assets or shares)
- Management contract; orAny other modality that transfers significant management control, risk or both, to a private firm (e.g. outsourcing and PPP Contracts).
Cabinet has overall authority in relation to matters of policy set out in the Privatisation Policy. The Development Bank of Jamaica serves as the Privatisation Agency and the GoJ appoints Enterprise Teams which oversee the privatisation of specific GoJ assets.
The privatisation transaction is as varied as the assets which it seeks to privatise. The privatisation of an entity is carried out through the following typical stages:
- Approval of Asset or Entity to be privatised by Cabinet
- Appointment of Enterprise Teams
- Valuation of assets
- Approval of Privatisation Strategy
- Pre-marketing of opportunity
- Issuance of an Information Memorandum or Request for Proposals (RFP)
- Advertisement of Opportunity
- Evaluation of Offers
- Due Diligence on Bidders
- Selection of Preferred Bidders
- Negotiation with Preferred Bidder
- Approval of Negotiated Privatisation Terms
- Contract Closing
The length of a typical privatisation transaction is not prescribed. Assuming no interruptions and the transaction progresses as planned, it should take between 12-18 months for the completion of a privatisation transaction. The length of privatisation transactions may be impacted by:
- GoJ procurement process for engagement of consultants
- Readiness of entity for privatisation (availability of audited or other financial information, legal and other due diligence information)
- Legal or other issues revealed in the due diligence process which may impede the transaction and must be resolved.
- Funding for the privatisation transaction including the engagement of consultants
- Protracted negotiations of final terms with Preferred Bidders