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UKRAINE PUBLIC PRIVATE PARTERNSHIP (P3DP) PROJECT

QUATERLY REPORT - Y1Q1

SEPTEMBER 30, 2010–DECEMBER 31, 2010 USAID Cooperative Agreement # 121-A-00-10-00708-00

January 2011

This document was produced for review by the United States Agency for International

Development. It was prepared by AED under the Public-Private Partnership Development

Program in Ukraine.

DISCLAMER

The authors’ views expressed in this publication do not necessarily reflect the views of the

United States Agency for International Development of the United States

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Ukraine Public Private Partnership Development (P3DP) Project

Table of Contents

I. Executive Summary .......................................................................................................................... 3

II. Work Plan Tasks During the Reporting Period ............................................................................. 5

III. Other Activities During the Reporting Period................................................................................. 8

IV. Work Plan Tasks for Coming Reporting Period ............................................................................ 9

V. Administrative and Managerial Issues .......................................................................................... 11

VI. Exceptional Issues ........................................................................................................................... 13

VII. Attachments .................................................................................................................................. 14

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I. Executive Summary

The Public-Private Partnership Development Program in Ukraine (P3DP) was awarded to AED

on September 30, 2010 at which time AED responded to USAID’s request for a rapid project

start up and took immediate steps to begin project operations by employing a small local staff on

independent consultancy contracts and securing temporary office premises. The COP, Alan

Pieper, was employed by AED in early October and arrived in Kyiv by month’s end to direct

project activities.

Expat consultants Larry Hearn and Chris Shugart were contracted to assist with project start up

activities and conduct an initial evaluation of the PPP environment in Ukraine. Utilizing input

from extensive interviews with USAID, Ministry of Economy, donor development projects and

local NGOs, the Work Plan for Year 1 was finalized and submitted to USAID on November 30,

2010. PPP laws that were already being constructed by the GOU’s Inter-Agency Public-Private

Partnership Working Group (PPPWG) were translated into English and reviewed to establish a

basis for evaluating the legal framework in Ukraine and a comparative benchmark with

international standards.

The lengthy process of registering a USAID project in Ukraine was the primary focus of the

administrative staff. Following the guidance of Tatiana Kistanova, Coordinator of Contractors’

Support Unit at USAID, P3DP staff coordinated a meeting with Mr. Anatolii Maksiuta, First

Deputy Minister of Economy, to define the assistance role that P3DP would provide. The terms

of assistance were solidified in a Memorandum of Understanding between the Ministry of

Economy and P3DP, a required step in project registration. Other registration documents were

prepared and submitted by mid-December, and it is expected that formal registration will be

approved by the GOU within 90 days.

Actions were initiated to select additional P3DP staff and secure permanent office premises.

Advertising in local papers and networking resulted in identifying candidates for approximately

60% of staffing requirements, although P3DP cannot finalize employment contracts until it

receives its formal registration from the GOU. Thirteen potential office premises were evaluated

and lease contracts for several high-potential premises were constructed and submitted to AED

for legal review and approval. It is expected that the P3DD office will be secured and

operational before the end of February 2011.

P3DP is aggressively pursuing actions to realize substantive interventions in all of the four

objectives defined in its Cooperative Agreement. A key element for successfully impacting PPP

development in Ukraine is concluding sub awards with local institutions and NGOs that will

provide essential services in achieving P3DP goals and objectives. After extensive interviews,

the following implementing partners were identified to provide supporting resources:

1. Ukrainian Public-Private Partnership Development Support Center (PPPDSC)

2. Association of Ukrainian Cities and Communities (AUC)

3. Institute for Budgetary and Socio-Economic Research (IBSER)

4. East Europe Foundation (EEF)

5. Agrarian Markets Development Institute (AMDI)

6. Kyiv Economic Institute (KEI)

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P3DP’s kickoff event was on December 13, 2010 at the USAID-sponsored Partners’ Meeting

focusing on public-private partnerships (see attachment 7a). Held at the Rus Hotel, the event

was attended by 40 professionals in the field of PPP development with presentations delivered by

USAID and local institutions engaged in PPP development.

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II. Work Plan Tasks During the Reporting Period

Subsequent to the signing of the grant agreement on September 30, 2010, commitments for

mobilization of the Chief-of-Party (COP) were made, and a small cadre of local contract

employees was selected to effect initial program mobilization activities. Additionally, AED

secured temporary office facilities and the use of certain equipment from the Agrarian Market

Development Institute (AMDI).

On October, 30, 2010, Mr. Alan Pieper arrived in Kyiv to begin his responsibilities as the COP.

Working with the retained local contract employees and with the assistance of two administrative

persons mobilized from the AED home office, the COP led the initiation of program registration

with the Government of Ukraine (GOU) authorities and other startup activities as required. See

Section 5 for more details regarding the administrative and managerial issues of this reporting

period.

With short term technical assistance (STTA) provided by Mr. Larry Hearn and Mr. Chris

Shugart, the initial draft of the Work Plan for Year 1 was completed and submitted to USAID on

November 30, 2010, per cooperative agreement (CA) requirements. The development of this

plan evolved from requirements noted in the CA, discussions with USAID and potential

counterpart and partner entities and personnel, development and review of the Performance

Monitoring and Evaluation Plan, and the inputs from home office, long-term and short-term

professionals. Initial formal comments from USAID were received on December 14, 2010, and

discussions will be held in Year 1 Quarter 2 (Y1Q2) to resolve issues and finalize the Work Plan

for Year 1. With Work Plan elements and USAID comments in mind, efforts to revise the

program budget were begun during the period. It is expected that a formal submittal of the

revised budget will be made to USAID in Y1Q2.

Concurrent with Work Plan drafting, P3DP technical staffers reviewed many documents and

interviewed many local parties, including representatives from USAID, USAID projects, other

donor projects, other multi-national organizations, and Ukrainian public- and private-sector

individuals. This broad level of information-gathering led the P3DP management to successful

identification of potential initial Implementing and Resources Partners to assist with program

implementation. See Attachment 7b. for a “MindMap” of the planned resources and their

intended areas of support.

Of particular importance for the period, relationships were established with various persons in

the then-Ministry of Economy (MOE, which has been more recently reorganized into the

Ministry of Economic Development and Trade, the GOU’s Inter-Agency Public-Private

Partnership Working Group (PPPWG, or simply WG), and the Public-Private Partnership

Development Support Center PPPDSC. P3DP is working under the assumption that the MOE

(or its successor organization or appointee) will be the primary GOU counterpart entity, and it is

the entity through which P3DP is pursuing its formal registration as a legal entity in Ukraine.

See more details regarding registration, etc. under Section 6.

P3DP senior staff attended the UK conference on Public Private Partnerships in Ukraine held at

the Rus Hotel on December 8, 2010. Approximately 50 attendees received presentations from

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PPP experts from Ukraine, Russia and UK. Ms. Tatiana Lisitsa gave a presentation representing

the MOE of Ukraine and insightfully stated, “Political will and political support will be required

for success of PPPs in Ukraine”. Ms. Elena Shishmariova, Senior Associate at Allen & Overy

Legal Services in Moscow, noted that Russia was a few years ahead of Ukraine in PPP

development. Her implication was that Ukraine may have be able to draw on the experiences in

Russia to design a successful PPP environment. Chris Shugart, STTA consultant for P3DP

followed up on the potential of contracting Ms. Shishmariova for training in Ukraine.

A. Objective 1

Preliminary access to laws and other legal documents were facilitated by leadership of the

PPPWG and PPPDSC and translated under support from P3DP contract employees. These

documents received primary review by STTA Shugart with respect to their efficacy in supporting

the intended robust PPP environment for Ukraine. Additional review and access will follow in

Y1Q2, with intended assistance to be provided in the drafting, submittal and implementation of

subsequent laws, policies, regulations, etc. See Section 4 for planned activities in periods

following. The future activities may be supported by applicable Study Tours to be attended by

targeted GOU, WG and other personnel. Initial concepts regarding the design and timing of

these and other capacity-building initiatives were envisaged in this reporting period.

B. Objective 2

Review of accessible documentation on the legal requirements of the establishment of a GOU

PPP Unit was augmented by reviews of other known PPP Units in other countries and

discussions with knowledgeable persons regarding the appropriateness of various PPP Unit

design concepts. Not having formal access to GOU resources and personnel due to the lack of

formal program registration limited the initial organizational development activities to targeted

speculation regarding personnel qualifications, origin, training, etc. With clarification of

organizational responsibilities, budget definition and other factors, a robust training plan will

follow an appropriate training needs assessment in support of the PPP Unit.

C. Objective 3

In overall support of P3DP activities, the awareness and capacity-building initiatives to be

managed under this objective will form the foundation and serve as the resource base for more

targeted initiatives in other objectives. In support of these efforts, interviews in the period

included training and capacity-building discussions focused on the experiences and perceptions

of those being interviewed. Further, several entities were identified during the period that will be

more-formally called upon in subsequent periods to provide awareness, training needs

assessment and training provision services as these are identified and become timely in the roll-

out of the program activities.

D. Objective 4

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Support in the achievement of successful pilot PPP projects is a primary goal of P3DP. With this

in mind, program activities during the period included:

1. Exploring partnerships with USAID and other donor-funded projects with the purpose of

narrowing identification of potential PPP projects and public/private partnership players

of interest

2. Examining alternative PPP project eligibility criteria

3. Defining and beginning initial planning for a “market sounding” event for PPPs

4. Initiating the development of the process for identification of potential PPP initiatives to

be defined and submitted to USAID for approval in Y1

5. Sounding out the possible sources of support funding for PPP projects with both national

and international financial entities

6. Defining the framework process for managing the first two pilot PPP projects intended to

be fostered during Y1

Keeping a “low profile” during its pre-registration status, P3DP was unable to directly engage

potential GOU or municipal entities in the above discussions; however, extensive discussions

with entities such as the Local Investment and National Competitiveness (LINC) project, the

Municipal Heating Reform (MHR) project, the Eastern European Foundation (EEF), and the

Association of Ukrainian Cities (AUC) helped to clarify the environments to be encountered at

the municipal level where the bulk of the pilot PPP projects are expected to emerge for P3DP

support. These environmental analyses will include readiness of both public and private

potential entities – AND their personnel to be involved, the financials related to the project, and

the financing and funding potentially available to support the implementation and sustainability

of desired successful pilot PPP projects.

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III. Other Activities During the Reporting Period

In its startup quarter, P3DP attended and assisted in facilitation of a USAID Partners Meeting,

which was held at the Rus Hotel on December 13, 2010. This meeting, comprised of some 40

professionals, was focused on public-private partnerships, and included presentations from

USAID project personnel and notable local persons involved in current PPP activities.

To support the concept of formalizing public-private partnership activities in Ukraine, P3DP

leadership embarked on initially assessing the current general levels of common understanding in

the public and private sectors in Ukraine. As one might expect in such a nascent environment for

this concept, there were many differences in understanding, including definitions of terms in this

arena. In addition to these terms, P3DP will seek to standardize its use of certain other terms

during the life of the project in order to promote more accurate communications among all

parties. To that end, the following definitions are under use with P3DP and its partners:

“Public-Private Partnerships” for purposes of P3DP - Public-Private Partnerships occur when

public sector entities and private sector entities enter into long-term, comprehensive contractual

arrangements for either (a) the development of public infrastructure and its on-going related

public services or (b) the delivery of social services; and for the transfer of significant risks and

provision for performance rewards to the private sector entities. This term will be abbreviated

“PPP” in oral and written communications.

“Program” to be used when referring to P3DP – to attempt to avoid confusion when using a

short-form referral to P3DP, the word “program” [rather than “project”] will be used in oral and

written statements.

“Project” to be used when referring to a PPP project (contemplated or actual) – similar to the

above reason, the word “project” will be used in oral and written statements when referring to an

initiative which may become or is a PPP project.

“Implementing Partner” – with reference to the MindMap included as Attachment 7b, a P3DP

“implementing partner” is an entity with which P3DP will have a standing formal scope of work

defined that will directly contribute to the integrated execution of CA initiatives. This

relationship is characterized by a mutual, long-term commitment between P3DP and the entity.

“Resource Partner” – with reference to the MindMap included as Attachment 7b, a P3DP

“resource partner” is an entity with which P3DP may/will call upon from time to time for

targeted execution of some service or development of one or more deliverables. This

relationship is characterized by a short-term contract [purchase] between P3DP and the entity.

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IV. Work Plan Tasks for Coming Reporting Period

A. Conclude employment agreements with local project staff:

Through advertisements and networking during the first quarter, approximately 60% of

local candidates for project positions have been identified. Work in the second quarter

will focus on securing employment contracts for the identified candidates, recognizing

that actual employment contracts cannot be finalized until P3DP is registered as a legal

entity in Ukraine.

B. Develop and conclude sub award terms with implementing partners:

The initial startup team devoted substantial effort during the first quarter to identifying

and interviewing potential implementing partners. After the initial evaluation, potential

implementing partners and support organizations are:

1. Ukrainian Public-Private Partnership Development Support Center (PPPDSC)

2. Association of Ukrainian Cities and Communities (AUC)

3. Institute for Budgetary and Socio-Economic Research (IBSER)

4. East Europe Foundation (EEF)

5. Agrarian Markets Development Institute (AMDI)

6. Kyiv Economic Institute (KEI)

During the second quarter, the goal is to identify the specific tasks and deliverables of

implementing partners and embody those terms in a formal sub award (i.e. sub contract or

sub grant).

C. Identify PPP leads for first two transactions:

P3DP will utilize the experience of its resource partners and draw upon their support to

identify a group of prospective PPP transactions. The resource partners with the greatest

potential to assist P3DP in this undertaking are USAID’s LINC and MHR projects.

Parallel to this effort, the project will be developing transparent selection criteria to select

the two PPPs that best fit the goals of P3DP and USAID. In general, the first two will not

be selected primarily because of their economic impact, but instead on the strength of

municipal partners and the probability of successful implementation. Evaluating

potential PPPs for selection to receive support by P3DP will involve extensive travel to

conduct on-site evaluations. The primary objective of assisting with implementation of

the initial two PPPs is to test and evaluate the enabling environment and exemplify

successful implementation practices.

D. Identify STTA consultants:

As a result of the broad involvement in PPP enabling environment and transaction based

implementation embedded in the four objectives of the project, a large resource pool of

STTA consultants will be needed to draw upon for project initiatives. Identifying a

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consultancy resource pool was started in Y1Q1, but substantial additional resources must

be identified and interviewed to determine their ability to be responsive to project needs.

E. Other tasks the project will engage in during the second quarter, but stand on their own

description are:

1. Review initial draft Work Plan for Year 1 with USAID and revise/update based on

final agreements from joint meeting(s);

2. As P3DP staff are formally retained, have appropriate technical personnel

complete the required Performance Indicator Reference Sheets (PIRS) supporting

the indicators in the finalized Program Monitoring Plan (PMP) assigned to their

respective areas of responsibility;

3. Initiate baseline gender assessment by developing SOW and identifying

institution or organization to conduct assessment work;

4. Initiate baseline survey for awareness and capacity building by developing SOWs

and selecting institutions to design and conduct surveys;

5. Conduct stakeholder consultations with various constituencies;

6. Begin formal review of legal infrastructure supporting PPPs in Ukraine;

7. Engage MOE and PPPDSC in efforts related to the establishment of a PPP Unit;

8. Design and implement PPP Study Tours for prominent GOU personnel and for

applicable personnel related to PPP Unit and its effective operations;

9. Initiate training needs assessment and initial training plan development for PPP

Unit and related GOU personnel;

10. Begin development of a draft PPP Action Plan;

11. Finalize the list of providers to support awareness campaigns, surveys and other

services related to promotion and capacity-building;

12. Initiate activities to identify capacity-building requirements at targeted

municipalities where potential PPPs may be developed;

13. Prepare and conduct a “market sounding” event for potential PPPs; and

14. Continue identification of potential PPP initiatives.

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V. Administrative and Managerial Issues

Three local administrative personnel (Olga Petrenko, Galina Esaulenko and Dmitriy

Opanashchuk) were contracted as independent consultants on October 15, allowing the program

to begin on-the-ground activities in Kyiv. Temporary office space, office equipment and

supporting personnel were contracted through Agrarian Markets Development Institute (AMDI),

a Ukrainian NGO receiving development support from AED, with funding from USAID.

AMDI’s cooperation and support allowed P3DP to quickly establish an office base in Kyiv to

engage in startup activities.

AED sourced Alan Pieper as Chief of Party (COP) in late September and formalized employment

on October 11, 2010. The newly-hired COP received AED orientation at AED’s headquarter

office in Washington DC and participated in P3DP work plan development on a part-time

schedule while finishing a prior consultancy assignment. The COP arrived in Kyiv on October

30, 2010, and assumed full responsibilities for directing project startup activities. The COP

secured permanent living quarters in Kyiv on December 4, 2010.

P3DP project personnel Alan Pieper and Olga Petrenko met with Tatiana Kistanova, Coordinator

of Contractors’ Support Unit, USAID, to obtain instructions on program registration procedures.

On November 23, 2010, following Tatiana’s guidance, P3DP senior staff met with Mr. Anatolii

Maksiuta, First Deputy Minister of Economy; other representatives of the MOE and members of

the Inter-Agency Public-Private Partnership Working Group. The meeting defined the

assistance role of P3DP relative to the MOE and the Inter-Agency Public-Private Partnership

Working Group and conceptual components of the Memorandum of Understanding (MOU)

between the MOE and P3DP was consummated. P3DP prepared a detailed MOU that was

submitted to the MOE on November 29, 2010. Concluding a signed MOU between P3DP and

the MOE is a required document for program registration. All other registration documents were

prepared and submitted to Tatiana Kistanova on December 15, 2010.

Actions to establish a permanent P3DP program office were immediately initiated by contacting

local real estate agencies and investigating leads on office space possibilities from various

sources, including existing donor projects operating in Kyiv. By November 22, 2010, 13

potential project office spaces were evaluated and prioritized on the basis of location, size and

cost factors that best serve the needs of project operations. Draft office leases were developed

and submitted to AED for approval by December 31, 2010, though this opportunity later fell

through others are now actively pursued. The target is to have P3DP office facilities

contractually secured by February 1, 2011 and the office premise occupied and operational by

mid-February.

Teresa Mancini, Senior Operations Manager, and Rada Lankina, Program Officer, members of

AED’s home office support staff, arrived in Kyiv in early November to assist with project

startup. Ms. Mancini gathered comparative bank information to identify institutions suitable for

providing P3DP financial services; consulted with local legal council on employment laws and

registration protocol; interviewed insurance companies to identify health insurance providers for

local personnel; and solidified the relationship with the General Director for International

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Representative Offices (GDIP) to process local employee payroll in accordance with Ukrainian

laws. Rada Lankina trained local staff on administrative practices required by AED’s

Compliance and Integrity policies.

Larry Hearn served as an STTA consultant to develop the initial P3DP Work Plan for Year 1 and

its associated Performance Monitoring and Evaluation Plan (PMEP) that were submitted to

USAID on November 30, 2010. Mr. Hearn also assisted with various other phases of project

startup, most important of which were his efforts in identifying project implementing partners

and resource partners. Chris Shugart also served as an STTA consultant, bringing to the project

worldwide expertise in PPP development. Based on his extensive experience on European Bank

for Reconstruction and Development (EBRD) and World Bank PPP initiatives in Europe and

Asia, Mr. Shugart was able to quickly evaluate the enabling environment in Ukraine and

conceptualize plans and actions for successful PPP implementation in Ukraine in the future.

The program budget accompanying AED’s proposal and in turn incorporated in the USAID

award on September 28, 2010 requires substantial revisions reflecting the implementation plans

encompassed in the Work Plan for Year 1. Program staff in Kyiv have been coordinating with

AED headquarter personnel to incorporate realistic budget assumptions and priorities based on

the in-field realities.

Though free entry to Ukraine is granted holders of US passports and with that allowance of in-

country residence for 90 days under tourist visa status, permanent in-country residence to work

on a USAID-funded initiative requires US citizens to obtain C-1 visa status. Ukrainian law

prohibits C-1 visas from being issued in-country, so the COP departed on December 15, 2010, to

return to the US to apply for C-1 visa status and arrange for shipment of his household effects

(HHEs).

The primary focus during the first six weeks of program startup was identifying appropriate staff and

office premises to build a highly productive organization with experienced personnel. Job openings were

advertised in local papers and extensive networking resulting in identifying candidates for approximately

60% of staffing requirements. However, actual employment contracts cannot be finalized until P3DP

receives its formal registration status from the GOU.

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VI. Exceptional Issues

From time to time, P3DP will become aware of issues that bear noting or watching for potential

current or future program impacts. This section of the Quarterly Report will document these

issues so that all applicable parties will be cognizant of potential impacts.

During Y1Q1, P3DP notes the following:

a. Unknown effects of the reorganization of the MOE into the MOEDT, including the effects

this may have on the efficacy of the Inter-Agency Public-Private Partnership Working Group

in relationship to P3DP initiatives.

b. Lack of the Consular General’s having/sharing access to known conditions under which a C-

1 visa may be obtained for permanent work/residence status, thus delaying securing the

COP’s C-1 visa. Though this issue has been resolved, its creating condition of the lack of

timely access to accurate information is a red flag for future program information gathering

and action planning/execution activities.

c. Initial review of both laws and the assessment of the related processes through which they

are made in Ukraine indicate that there is a general focus in legal arena on a great amount

[but perhaps not value] of details in laws, agreements, etc. – as this may have a bearing on

structuring and formalizing robust and saleable PPP agreements, etc. to international,

bankable standards.

d. Unknown impacts resulting from AED’s recent temporary suspension from receiving new

USG contracting. Although no impact on P3DP is anticipated in the short-term, if the

situation is not resolved quickly, it could impact the level of headquarter support for P3DP.

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VII. Attachments

A. Photos and Captions

In the following photo, Mike Martin, Director, USAID/Ukraine Office of Economic Growth,

welcomes attendees to the December 13, 2010, USAID Partners Meeting focusing on public-

private partnerships.

Irina Zapatrina, Deputy Chairperson of the Inter-Agency PPP Working Group and head of the

Public-Private Partnership Development Support Center, updates the Partners Meeting audience

on the current status of PPPs in Ukraine.

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Bil Tucker, COP of the USAID-funded Municipal Heating Reform (MHR) project, provides a

glimpse of PPP opportunities MHR has identified during its project activities.

Alan Pieper, COP of the USAID-funded P3DP, presents an overview of the scope of activities

contemplated under the newly-mobilized program supporting PPP process development in

Ukraine.

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B. P3DP MindMap of Relationships

The following page includes a MindMap of Resource Allocations and Management Plan for

P3DP, noting the implications of the difference between “Implementing Partner” and “Resource

Partner” entities.

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