Challenges In Developed Developing Countries Construction Essay

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Recently Public Private Partnership (PPP) gained popularity as the method of procuring public services in roads, bridges, hospitals and schools. The Private Finance Initiative (PFI) which is the UK version of PPP contributed widely to the delivery of public service projects in UK with more than 500 projects procure through PFI/PPP since its introduction by the government in 1992 (Wamuziri.2008). although PPP can be traced back to the 18th century from the concession contract of supplying drinking water to Paris, the Suez canal, Trans-Siberian Railways and turnpikes (Smith. 2002) (Tang, L et al.2009).The definition of PPP can be difficult as many scholars put any sort of cooperation between public and private sector in the category of PPP and because PPP exist in various shades and forms it almost defy formal definition (Anvuur & Kumaraswamy.2006). PPP can take different forms, Where delivery of public services involves private sector investment in infrastructure; however the underlying principle of PPP scheme is that certain construction and operational risks should be transfer to the private sector (Carrillo et al .2008) and the provision of facilities and services can be made at zero or minimum cost to public sector(Smith. 2002) other main reasons are to bring private sector expertise into the public, to achieve the value for money (VfM) (Grimsey & Lewis.2005) , to avoid public sector reputation of poor management and cost overrun (Smith. 2002) and to overcome financial constraints in the provision of public infrastructures (Anvuur & Kumaraswamy.2006). According to Smith PPP has two main scheme type, the first scheme type of PPP is the joint venture when the private sector consortium forms a special company called a "special purpose vehicle" (SPV) to develop, build, maintain and operate the asset for the contracted period. In cases where the government has invested in the project, it is typically given an equity share in the SPV. The consortium is usually made up of a building contractor, a maintenance company and bank lenders. Usually SPV signs the contract with the government and with subcontractors to build the facility and then maintain it. In the infrastructure sector, complex arrangements and contracts that guarantee and secure the cash flows, there is an other form of PPP when a concession a agreement make between the Public sector ( the principal) and the private sector (the promoter) and in this case there is less public sector involvement.Figures 1& 2 show the two forms.

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On the other hand, the Japanese PPP/PFI has its own issues to face, ( Mori,2006) stated that ; still Japanese PFI has many to do to achieve what has been don in the UK, beginning from the implementation of a comprehensive economic policy to the liberalization of legal regulations to encourage participation by the public sector on broad scale are both needed to overcome such challenges along with the creating of an organization to promote PFI from the prospective of private sector and putting a system into place to reduce risks in funding and operations as well as the importance of consulting work in the course of project management and the crucial of administrative reform to suit the stage. Therefore the PPP challenges can be categories into the areas of risk transfer, financial implications, contractual matters, politics, management and accountability.

PPP in developing countries has not been developed to the extent that enable it to deliver infrastructure projects when compare it with the delivery of infrastructure projects through PPP in developing world (Akintoye.2006) as most of the developing countries depends on the extraction and exploration of agricultural and raw materials to support the economy, the result is that the infrastructures that are needed are those essential to support the above activities and that include transportation, energy and portable water infrastructures. PPP consider by many scholars and academics as a suitable medium to deliver infrastructure projects in developing countries (Merna.2002) and may have the potential to solve sub-Saharan Africa’s profound infrastructure and service backlogs (Farlham.2005) and since the funding shortfall is one of the major challenges in financing infrastructure project in developing countries, the experience of PPPs by industrialized countries opened a window of opportunity for delivering needed public infrastructure projects in developing countries. According to (Anvuur & Kumaraswamy.2006) the experience of PPP/PFI infrastructures projects in developed countries identify many challenges which lie at the heart of VfM debate. In addition to that, there are concerns about the exclusion of local and Small-scale construction firms as only a handful of multinationals dominate every aspect of a PPP (Hunter and Kelly 2005).

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The aim of this paper is to explore and identify the challenges and constraints those may face the implementation of PPP/PFI in the provision of infrastructure public services in both developed and developing countries. The major findings is that there are many challenges and issues and PFI/PPP neither a panacea nor ultimate solution for procuring infrastructure projects, design change , cost overrun and construction delay remuneration and payment disputes and the difficulties to sustain service level are issues and challenges that need to be well addressed to assure the success of PPP.

It also highlighted some issues like the entry barrier (particularly in developing countries), the lack of relevant experience in PPP/PFI on the part of the client and slow negotiation. The paper also stated some of the factors those may be considered as enablers for PPP such as the economic viability, the suitable concessionaire consortium, sound financial package and the appropriate risk allocation between public and private sector. The paper consolidated that; in spite of the criticisms on PPP/PFI for heavily relying on the value for money for assessing projects, still PPP/PFI can contribute greatly in the provision of public service particularly in developing countries and open a window in the provision of infrastructure projects by overcome the most challenging issue in the developing world which is the short fall in funding provides that developing countries work to eradicate issues such like the absence of transparency and inadequate client brief and the poor project management.

The paper suggested that many opportunities exist to be grabbed and there are real chances to improve PPP/PFI performance from by assuring the clearness of strategic vision, improvement of client’s expertise, standardization of PPP/PFI risk assessment and management and the developing of a national date base, moreover the avoidance of unnecessarily high design specifications; the consideration of all the financing options before committing to one model and the involvement of all stakeholders will help improve PPP/PFI without neglecting the importance of incentives in term of acceptable rate of return on equity for both parties.