Overview
Introduction to Cardno
Developing Contracting Industry Post Conflict
> Case Study – Bougainville
Conventional PPPs
Case Study
> Choosing an appropriate PPP model
3
01
June 2015
Presentation
Overview of Cardno
> Cardno (ASX:CDD) is a global professional
infrastructure and environmental services company
> Teams of leading professionals who plan, design,
manage and deliver sustainable projects and
community programs
> Two regions: Americas and Asia Pacific
> Employs around 8,200 staff in over 300 offices
working on projects
in more than 85 countries
> Commenced operations in 1945 in Brisbane, Australia
> ASX200 company with a market capitalisation around
A$500 million
4
01
June 2015
Presentation
Global Footprint and Outlook Summary
Economic growth is expected to continue
to improve in the Americas. Recent project
wins in the US and Latin America have
bolstered backlog.
EMEA continues to be a high focus
area for Cardno as we leverage our
long history of development assistance
work in the support of the oil and gas,
mining and infrastructure clients.
Asia Pacific continues to present
challenges to the engineering sector
as the transition from resources led
activity to public infrastructure
remains slow and uncertain.
5,000 500 2,700
Bougainville
Brief Background
> Population ~ 300,000
> Semi-autonomous from PNG
> Pre-conflict
– Largest gold mine in PNG
– Extensive training of personnel for mine
– Large producer of copra & cocoa
> Conflict
– 1988 through to 1998
– Loss of contracting industry
– Loss of trained personnel
> Post Conflict
– No maintenance for > 10 years
– Across ports, roads and airports
– 10 years “loss” of education
Bougainville
Other key constraints:
> Remote location
– High cost of materials
> Low vehicle numbers
– Access to health, education and trade key
focus
> Without the mine, limited income sources
outside of national PNG inputs
> Land a significant issue, as all of PNG
Bougainville - Recovery
Immediate post-conflict
> Use of external contractors (e.g. PNG,
Australia) for emergency reconstruction
Following 15 years
> Maintenance based contracts
– Managing consultant
– Use of local contractors
– Need to have continuous work to have
“security” to develop industry
– Community based contracts
– Funded by Ausaid
> Various Design Build for larger projects
– Funded by various aid
Bougainville – Looking Forward
Local contractors
> Need to maintain workload on maintenance
to ensure security of work
> Need greater Bougainville government
involvement in management of maintenance
contracts
> For larger projects, ensure appropriate level
of local contractor involvement
Financing
> Traditional PPPs not appropriate for scale
> Options for financing or in-kind:
– Re-opening of gold mine
– Joint infrastructure
– Tax credit options
– Major cocoa production
– Palm oil production
According to the World Bank:
Public-Private Partnership (PPP) describes a private sector business
venture which provides a public service, traditionally provided by
government, which is funded and operated through a partnership of
government and one or more private sector companies.
Source: PPIAF website, Toolkit for PPP in Highways, 2009 revision
There are four main benefits of PPPs
Life cycle approachLevel of Service
orientation
Risk sharingNew finance
arrangements
PPP
Specifically:
• Life Cycle approach ensures maintenance is carried out
and also initial design is optimised to maximise overall life
benefits
• Level of Service Approach means that key driver is the
benefit to the user and output driven rather than input.
• Risk sharing between provider of service also shares
risk with the client
• New financing arrangements mean that additional
funds can be mobilised in addition to government budget
or fees paid for the service rather than infrastructure
What is feasible?
Cardno developed a model on the Dar es Salaam – Durban road
corridor in southern Africa that identifies the most appropriate
method whilst also considering how to develop domestic
contractors.
This model is now being applied in other countries as well.
This is described as follows:
Various road segments were analysed to assess work required
02/09/2009 08:20Regional aid for trade
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Options Considered by consultant
Extent of Private Sector involvement
Tradi onal Framework
IntegratedSupplyChain
FeeforService
Toll
Traditional (Contracts)
• Normally one-off
• For smaller routine works the road agency tends to specify and supervise the works direct and
• For the larger periodic works, a consultant is often used for the supervision and design.
Framework Contracts
• pre-approved set of contractors• fixed rates • supply, works, and professional service • enable purchasers to place orders without
secondary competition• substantially speed procurement• last for one to five years• frequent tendering is removed and hence
administration costs are reduced
ISC Suitable because
Foreign contractors are dominating the industry and construction prices are becoming very high
Provides opportunity for specialist smaller scale domestic suppliers
Separate contracts can be procured for plant (haulage, grading, crushing..); materials (asphalt, concrete aggregates, gravel, culverts, structures) and labour (unskilled, artisans)
Fee for Service Contracts (PPP)
Provider of service pre-finances capital works, manages maintenance and then charges road agency for facility provided
Long term performance contractsMany different payment systems:
> Shadow tolls> Availability payments> Active Management Payment Mechanisms (AMPM)
Examples in S. America and India
Toll Road Concessions
• Private operator or “Special Purpose Vehicle”takes over section of road or network
• Charges tolls for use of road• Minimum 15,000 vpd• Could be partially subsidised for lower traffic
levels• Tolling technology continuously improving• Examples in S. Africa, Asia, America and Europe
Multi Criteria Analysis
Degree to which the project will improve regional integration (10%)
Degree to which the project will lower the costs of cross-border transactions (10%)
Commitment of the national government to PPP solutions, including the legislative environment (15%)
Level of commitment of government to the financing of road maintenance from the Road Fund (15%)
NPV/cost of section improvement as per economic study (50%)