An online conference of the Ukrainian-Turkish Working Group on PPP has taken place

Published on: 11.06.2021
Category: PPP News

On the 10th of June, an online conference of the Ukrainian-Turkish Working Group on PPP was conducted. 

Among the participants were the representatives of central executive bodies of Ukraine, including the representatives of the Ministry of Economy of Ukraine, the Ministry of Health of Ukraine, the Ministry of Finance of Ukraine, the Ministry of Foreign Affairs of Ukraine, the Cabinet of Ministers of Ukraine and the Ministry of Digital Transformation. The participants from the Republic of Turkey included the representatives of the Ministries of Health and Trade of the Republic of Turkey; representatives of the Turkish Contractors Association (TCA); the Association of Turkish Consulting Engineers and Architects (ATCEA); Presidency of Turkish Republic, Presidency of Strategy and Budget; construction company YDA Group and the Foreign Economic Relations Board of Turkey. The representatives of the embassies have participated in the conference as well.

The following important issues were illuminated during the conference by the Turkish side:

  • The process of developing a PPP program in the healthcare sector: in 2002, the Turkish government announced an “Urgent Action Plan” (UAP) under the “Health for All” initiative and, in 2003, the Turkish government initiated the “Health Transformation Programme” (HTP), which launched a PPP investment program;
  • The peculiarities of the PPP legislation, in particular in the healthcare sector. It was detailed, what significant changes in the legislation regulating the healthcare sector had to be made in connection with the implementation of PPP projects and what legislative decisions have proved to be decisive in attracting foreign investors in the healthcare sector. Thus healthcare facilities can be built under the PPP model, according to the Law № 6428 (2013) on Construction and Renovation of Healthcare Facilities and Procurement of Services under Public Private Partnership Model, which establishes key conditions and standards. Projects must be developed on state-owned facilities. At the same time, PPP contracts are subject to private law. During 2010-2014, several PPP projects were awarded, all of which were brought successfully to financial closure. All of these projects were based on the standard form of a PPP contract, established in accordance with the PPP legislation;
  • The main features of different PPP models (infrastructural, service and integrated) in the healthcare sector and the necessary aspects of their success. A partially integrated PPP model is common in Turkey. Under this model, a private partner (usually it is a consortium of construction companies/equipment suppliers, maintenance partners, ancillary medical service providers and investment funds) is responsible for the design, financing, construction and maintenance of healthcare facilities, as well as for the management and supervision of ancillary services and staff. Services provided by a private partner include so-called “hard services” – (facility, public utility and technical maintenance, improvement of public spaces, including landscaping, etc.), “soft services” (parking, cleaning, security, laundry, catering, waste management and HIMS services (Health Information Management Systems)), “ancillary medical services” (laboratory services, medical visualization, sterilization and disinfection services, rehabilitation). The public partner establishes functional requirements and specifications, manages and controls the healthcare personnel performance and makes availability payments (payments for the operational readiness of infrastructure objects after project commissioning) and payments for services provided. Availability payment is set at a rate that would offset the project financing costs. Payment for services is set at a rate that would cover operational costs of the project, including life cycle, hard, soft and ancillary medical services;
  • The advantages of PPP projects, compared to the classical model of public procurement. The rapid pace of the construction and/or renovation phase was highlighted as one of such advantages. It is the result of the high level of motivation of the private sector to ensure that the facility enters the exploitation phase as soon as possible;
  • The peculiarities of risk distribution between the public and private sectors during the different phases of the implementation of PPP projects. Thus, most of the risks associated with construction and operation belong to the private sector. Some of the risks, including technological and emergency risks, are shared between the two partners;
  • The lifecycle of PPP projects in Turkey, from initiation and planning to implementation and contract management;
  • The peculiarities of conducting a tender for the selection of a private partner in Turkey, compared to common international practice. In Turkey, the selection of a private partner is carried out through a multi-step tender mechanism that includes the negotiations phase (compiling a short list and conducting negotiations or using the “Best and Final Offer” (BAFO) method). 

In general, a tender includes the following phases:

– Pre-qualification;

– Submission of initial and final proposals (applicants submit their technical and financial proposals, then they are ranked according to their initial proposals, two candidates are selected from the bid evaluation process (usually on the basis of pass/fail for the technical proposal and lowest bid for the price); after negotiations, the two selected candidates are invited to submit their Best and Final Offer (BAFO));

– Auction and the announcement of the winner (shortlisted bidders compete with each other in a Dutch auction; the preference is given to the offer, which indicates the lowest availability payment and payment for services; then the tender committee invites the bidder with the best bid to the final round and announces the winner); 

– The signing of the contract (the contract is signed between the project company and the Ministry of Health when the bidder creates a project company and submits a guarantee of fulfillment of project obligations).

It is worth noting that such an approach requires much more time and resources from all parties involved.

Particular attention was paid, during the conference, to the importance of proper quality control of the services provided by private partners. For example, in the case of PPP hospitals, there are 6 types of services that are mandatory and 12 that are optional. Requirements for all the services are detailed in PPP contracts, along with the performance indicators as well as measurement and calculation algorithms. The quality of these 18 types of services is measured against more than 600 parameters and key performance indicators (KPIs). Each key performance indicator has a response and amendment times specified. If the problem is not resolved within the set period of time, the service provider receives penalty points and a fine. Such penalties for shortcomings in service provision are paid monthly. Their maximum amount cannot exceed 20% of a particular payment for services at any settlement date.

The “Technical Support” system measures performance and charges penalties automatically, depending on the circumstances. The use of artificial intelligence for monitoring is under consideration.

During the conference, the parties discussed issues raised during the event. The event ended with an invitation, made by the representatives of the Republic of Turkey, to the representatives of Ukraine to visit Turkey, with the goal to develop a more comprehensive understanding of the peculiarities of PPP mechanism usage in the Republic of Turkey and to see hospitals built under the PPP model.