Planning for PPP

Governments in the Gulf are looking to PPP for ICT projects, but agreements need to be well thought out

Tags: Public private partnershipSmart cities
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Planning for PPP PPP may be one route to developing smart cities, but all details of joint ventures need to properly planned. (ITP Images)
By  Mark Sutton Published  December 19, 2016

Public-private partnerships are gaining an increasing amount of attention from government organisations in the Gulf, with ICT becoming a new area of focus for collaboration. While the PPP model is well-established in the west, particularly in large scale infrastructure and construction projects, there is now growing momentum for PPP in the technology sector, especially in smart cities, and the GCC is joining this trend.

The benefits of PPP are well known, and particularly with the strain on budgets and government spending in the region, PPPs are looking like an attractive way to keep up the momentum of digital transformation while spreading the financial burden. Other PPP benefits include improved access to. or better capabilities to develop new technologies and expertise, extracting better value from the project over time, greater efficiency in delivery, and more incentive for private sector partners to deliver on a project.

The model certainly looks like a good fit for smart city projects, where new technology is coming into play, and where each city or municipality requires solutions for its own unique situation.

There are, however, a number of considerations which any party entering into a PPP needs to examine carefully, to ensure that the program achieves the desired objective. The framework, and legal support, for any PPP needs to be solid, and transparent, to ensure it does not run into issues later on.

Areas for attention include the financial structure of any agreement, incentives, penalties for missing targets, and final status of any jointly created assets. With technology in particular, the ownership of any IP generated needs to be clearly spelled out. Government entities might hope to gain an ongoing revenue stream from a joint venture which creates a new product, and private sector partners may welcome the chance to develop ‘real world' solutions, but the rights to the IP have to be clearly defined. In areas like public safety solutions, this is particularly important where it must be assured that a private sector partner is not giving access to the technology to anyone who should not have it.

In a similar vein, any data created or gathered by a PPP needs to be treated responsibly. PPPs need to be transparent about their intentions for any data, and government must apply its own standards of data protection.

Skills and knowledge transfer is another area where both sides need to understand what they will get out of the deal. Governments may well require their staff to receive training to eventually be able to take over the project, but at the same time, private sector partners do not want to see their expert personnel siphoned off into government jobs to make up for any shortfall in knowledge transfer. The method and responsibility for knowledge transfer should be clear and agreed upon.

Financial aspects must also be clearly defined. Smart city joint ventures have been suggested as a great opportunity for startups, but most startups will struggle to match small budgets and cash burn with the slow financial cycle of government.

Most importantly of all, government partners must understand that they are still responsible for the outcome of any PPP. The government's duty to the public for the quality, effectiveness and standards of service remain with the government, and while private sector partners may walk away from a project, the government has final responsibility for its success.

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