SA Affordable Housing January - February 2019 // Issue: 74 - Page 31

INDUSTRY MATTERS The effectiveness of PPPs was demonstrated as far back as 1999, with Blue IQ. Gautrain is a great example of PPP. South African law defines a public private partnership as a contract between a public sector institution and a private party, in which the private party assumes a substantial financial, technical and operational risk in the design, financing, building and operation of a project. The International Finance Corporation, which is widely regarded as a go-to guide on these matters, broadly defines a PPP as a ‘long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance’. The private sector is well poised to deliver the financial, people skills and expertise for infrastructure development. It also carries the risks along with the public entity, ensuring good service delivery. In reference to the stadia that were built for the 2010 World Cup, a 2015 Mail & Guardian article by Lisa Steyn states that, “Their main findings indicate that ancillary investments near the stadiums are essential to mitigate risks and that the coordination of a central government entity may reduce the capital required for risk management when several stadiums need to be built in a short timeframe.” It is quite conceivable, had the PPP model been adopted for the stadia and associated infrastructure, that the measures required to mitigate the risks after the fact, could have been avoided. Economic models are specific to each partnership and it should be to the benefit of each party. The PPP model is also intended, in part, to alleviate the pressure on the fiscus, therefore assisting government in meeting its GDP targets as it relates to infrastructure development, economic growth, job creation and other such factors that will have a positive effect on the trajectory of the country (in the broader sense). By its nature, a public private partnership entails: • targeting public spending, principally on outputs to agreed standards • leveraging private sector financing and efficiencies • allocating risks to the party best able to manage the risk In South Africa, the private entity is most likely to provide the efficiencies and is best placed to manage the operational risks. Take for example, the Isibalo House, the fairly new Stats SA building built to accommodate more than 3 000 people. At a cost of R1.4-billion, this is a PPP between Stats SA and Dipalopalo Consortium, that sub-contracted Dipalopalo Facilities Management Solutions (DFMS) to provide one of the most integrated facilities management solutions known in South Africa. DFMS is a special purpose vehicle, created to operate the building for 26 years. This partnership allows Stats SA to focus only on their core business and outputs, with facilities being managed by DFMS. The services provided include cleaning, security, landscaping, catering, hygiene and pest control. In facilities management parlance, these are referred to as soft services. DFMS has subcontracted these services to Servest Integrated Services to deliver on all these soft services. The benefits of having these services provided by a single entity include reducing costs associated with multiple service providers, reducing the number of contracts that have to be overseen and simplifying the overall management of subcontractors. The success of any PPP can be measured from three different perspectives* namely, project management, stakeholder perspective as well as contract management. DFMS, as the operator of Isibalo House, concerns itself primarily with contract management. For the duration of the PPP, the success or failure of the PPP rests on how well the contract between the private party and the state is managed, as well as how well the subcontractor agreements are managed between the operator and its subcontractors. The success of the Stats SA project, to date, can be attributed to a proper understanding and monitoring of contractual obligations of each party, as well as a commitment to comply with said obligations. Facilities management at Isibalo House, however, goes beyond the usual cleaning, security and other soft services. It includes technical services such as mechanical ventilation, electrical, lifts, fire protection, building fabric and finishes, telephony, security systems and audio-visual equipment in over 40 conference rooms, ensuring high availability and functionality of this cutting-edge technology. Life cycle asset management plays an important role in the partnership with the risks associated with the operation of the building being borne by the private party, not the government, for the life of the partnership. The effort to make a success of this, or any PPP for that matter, is greatly assisted by regular communication and consultation, which pre-empts problems and aids the effort to realise and enhance the benefits of the PPP for all stakeholders. Source: JANUARY - FEBRUARY 2019 29