Critical Success Factors for PPP/PFI Projects Professor Cliff Hardcastle Glasgow Caledonian University
£10 billion Capital Expenditure PFI announced 1992 United Kingdom 1992 - 1999 • •
Problems • High Costs of Tendering • Complex Negotiations • Cost Restraints on Innovation • Conflicting Objectives among Stakeholders • Mortgaging the Future
But! • Many are Successful • 17% Savings v. Traditional Procurement (Archer Anderson/LSE 2000)
Metropolitan Transport Water Transport Highways Hospitals Schools Roads PFI • • • • • •
Critical Success Factors PPP/PFI “…those few key areas of activity in which favourable results are absolutely necessary for a manager to reach his/her goals”
Summary of CSF’s for PPP Projects Critical Success Factor Strong private consortium Appropriate risk allocation and risk sharing Competitive procurement process Commitment/responsibility of public/ private sectors Thorough and realistic cost/ benefit assessment Project technical feasibility Transparency in the procurement process
Good governance Favorable legal framework Available financial market Political support Multi-benefit objectives Government involvement by providing guarantees Sound economic policy Stable macro-economic environment Well organized public agency Shared authority between public and private sectors Social support Technology transfer (NB. Not included in this PPP/PFI research)
Survey 61 completed out of 500 12% Response 16 Public Sector 45 Private Sector Directors / Managers 21.7 Years of Experience
Research Design 18 CSFs Questionnaire Survey 3 Sections Individual + Organisational Issues + CSFs Risk Management Convenience Sampling Draft for Comment Pilot Study
Survey respondents’ perceptions of the relative importance of CSFs in PPP/PFI projects. Critical Success Factor Strong private consortium Appropriate risk allocation and risk sharing Available financial market Commitment/responsibility of public/private sectors Thorough and realistic cost/benefit assessment Project technical feasibility Well organised public agency Good governance
Critical Success Factor Favourable legal framework Transparency in the procurement process Political support Competitive procurement process Sound economic policy Multi-benefit objectives Stable macro-economic environment Government involvement by providing guarantees Shared authority between public and private sectors Social support
3 Top Factors Strong Private Consortium Appropriate Risk Allocation Easy Access to Financial Market
Factor Analysis Factor Groupings Represent Relationships Many Related Variables
Total rotated factor variance explained for Critical Success Factors for PPP/PFI Projects . Initial Eigenvalues Rotation Sums of Squared Loadings Component Total % of Cumulative Total % Cumulative Variance % of Variance % 1 5.9726 33.1813 33.1813 4.0585 22.5471 22.5471 2 2.2708 12.6153 45.7966 3.1779 17.6553 40.2023 3 1.9120 10.6220 56.4186 1.9310 10.7280 50.9304 4 1.2408 6.8934 63.3121 1.8834 10.4631 61.3935 5 1.0667 5.9260 69.2381 1.4120 7.8446 69.2381 6 0.8057 4.4760 73.7141 7 0.7758 4.3100 78.0241 8 0.7411 4.1170 82.1411 9 0.5743 3.1907 85.3318 10 0.4987 2.7706 88.1024 11 0.4376 2.4308 90.5332 12 0.3729 2.0719 92.6051
5 Factor Groupings • Effective Procurement • Project Implementability • Government Guarantee • Favourable Economic Conditions • Available Financial Market
Conclusion 3 CSFs Strong Private Consortium Appropriate Risk Allocation Available Financial Market
5 Factor Groupings Effective Procurement Project Implementability Government Guarantee Favourable Economic Conditions Available Financial Market
Thank you
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