Purpose – Public Private Partnership (PPP)
has increased in popularity and is being used extensively in the construction
market. For PPP projects already completed or for those in progress, the
question is how effective are these projects? Do they meet their performance
requirements and are they valuable to the stakeholders? How are PPP project
performances assessed? There is a necessity to study the key performance indicators
(KPIs) that will measure and enhance their performance.

Design/methodology

A questionnaire survey was conducted to identify and prioritize the main
functional KPIs for PPP projects. Reliability analysis using the Cronbach’s
alpha was performed to check the internal consistency and reliability of the
results.

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Finding – The result of this research will be
to contribute to the existing understanding of PPP performance measurement of developing
countries, by providing a framework for selecting KPIs to measure the PPP
concessionaire performance.  Validation
of results was done by PPP experts.

Social – The partnership provides a
competitive and transparent mechanism to pursue opportunities that bring
together ideas, experiences and skills of both sectors and develop creative
solutions to a community’s needs.

Originally/value – It is targeted
that government adopts an evaluation system of concessionaire selection based
on performance. The results could be used to create prediction models for
evaluating PPP project performance.

 

 

Keywords: Public-Private Partnerships
(PPP), Infrastructure, Concession, Key performance Indicators (KPI), Functional KPIs.

 

 

INTRODUCTION The procurement of
infrastructure and other construction projects has changed significantly in recent
years.  One of the latest is implementing
Public Private Partnership (PPP). The involvement of the private sector, in
partnership with government, has been promoted as a means of improving development
of infrastructure and service delivery of various sectors. The PPP concept is
not a new one. In 1589, the Perrier brothers were contracted to construct a
water supply system in Paris. In the mid-19th century, the United States
Government was looking for ways to improve infrastructure, so land was accorded
to private companies to build a railroad infrastructure.   The
United Kingdom has pioneered the trend. Through its Private Finance Initiative
(PFI). PPPs allow governments to improve the quality and accessibility of
public systems without burdening public finances. PPP can also provide more
Value for Money (VfM) compared to other forms of procurement and production. Countries
with remarkable PPP experience have found that PPPs manage financial and
execution better than traditional procurement
methods, typically attributed to the incentives created by the PPP stakeholder structure.
Egypt
similar to other developing countries, used PPP to providing a new source of
investment in the required
infrastructure projects.  PPP has the
ability to reduce sovereign borrowing and associated risks, create local
long-term funding markets, stimulate job creation and improve the quality of
public services to the Egyptian peoples. 
Egypt’s PPP policy framework is the use of performance-based contracts.
It is important that all parties recognize that the contract performance is a
key measure of best VfM. Most of the completed PPP projects in all the World
have been considered as successful, but the question is how to measure and
evaluate this success? LITERATURE REVIEWPPP is increasing in
popularity and is being used widely for infrastructure development in the
global construction market (Tang et al. 2010). PPP arrangements have been driven by limitations in public
funds and the need to leverage expertise from the private sector to improve the
quality and efficiency of public services (Grimsey and Lewis, 2004). The
financial crisis of 2008 renewed the attention on PPP projects (Greve et al, 2013). PPPs are unlikely to
completely replace traditional methods
of investment in infrastructure projects. PPP runs on the boundary of the
public and private sectors (Lienert, 2009), Thus, politically, they represent a third way in
which governments can provide certain public services (Grimsey and Lewis,
2005). The development of PPP is part of a general worldwide trend towards increasing private sector
participation in public infrastructure development (Harris, 2003). PPPs are
often considered a ‘solution for all problems’ by some government institutions
in providing the required services, especially infrastructure (Cagnino et al,
2006). Due to pressure arising from increasing demands, levels, and the
deteriorating state of existing infrastructure, many governments were forced to
introduce Public Private Partnership arrangements (Buckberg et al, 2015). The
challenge to the PPP market is to ensure that projects can be financed under
current market conditions and that they still can deliver VfM (Yuan et al.,
2011). The best delivered VfM does not correspond to the lowest starting price,
but VfM is defined as the optimum combination of whole life cost and quality to
meet the user’s requirements. (Coulson 2008, Barutha 2016). In 1992, the UK
Conservative Government introduced the Public Finance Initiative (PFI). The
focus was to reduce the Public Sector Borrowing Requirement. Yet in 1997, when
Labor government was elected, PPPs sought to shift the emphasis to the VfM
through risk allocation (Davies, 2008). PPP markets in the developed countries
have since matured and private investors now have full confidence in their
markets (Osei-Kyei and Chan, 2015).The European Investment
Bank (EIB 2004) suggests that PPPs are “the relationships formed between
private sectors and the
public often with the aim of introducing private sector resources and/or
expertise in order to provide and deliver public sector assets and services”. The
Canadian Council for Public Private Partnerships (2004) defines PPP as “a
cooperative venture between the public and private sectors, built on the
expertise of each partner that best meets clearly defined public needs through
the proper allocation
of resources, risks and rewards. The Public Private Infrastructure Advisory
Facility (PPIAF) in Europe provides a definition in which a PPP “involves the
private sector in aspects of the provision of infrastructure assets or of new
or existing infrastructure services that have traditionally been provided by
government”. PPP projects do not
minimize the public sector’s responsibility to improve public services, only
the methodology for its provision and procurement is different. Public private
partnerships are characterized by the degree to which the public and private
sectors share the risks, obligations, and benefits of a project (Yuan et al.,
2008). A key significant characteristic of PPP is the allocation and sharing of
risk among parties (Ke et al., 2010). Project and performance risks usually
allocated to the party best able to manage or mitigate these risks (Leiringer,
2006). The main objective of PPPs is to effectively manage project risks, reduce
public sector administrative costs, solve the problem of public sector
budgeting constraints, provide higher quality public products and services, and
save time delivering the projects (Yuan et al., 2010). The World Bank (2009)
presented a project preparation guide which specifies the key factors that attracts investors to
the local PPP markets in African countries. The guide mentions that favorable
legal framework and policy, financial viability of projects, long-term
political acceptance and support, competent PPP units and public sector’s
experience in PPPs are some of the critical factors that attract investors.  According to Deloitte
Research (2006), a variety of new and innovative PPP delivery models have been
developed to address various challenges posed to public-private partnerships in
specific conditions and sectors. These models include

      

Alliance, Bundling,
Competitive, Partnership, Incremental Partnership, Integrator
and Joint Venture. The level of certainty the public sector possesses
about its infrastructure and service requirements should be a key determinant
in the choice of model. A high level of certainty suggests that the government
can shift substantial control and risk to the private sector. Egyptian models
for PPP projects usually use private developer scheme or conventional
procurement.

 

Performance
measurement and management are not new concepts. Performance measurement has
probably existed, in some forms, as long as management has been exercised. If
historic investigations are undertaken, it might be able to link performance
measurement of the
management activities in earlier civilizations like the Egyptian, Hellenic and
others.  Neely et al. (2002) stated that
if there is no measure, there will be no improvement. Measuring performance is
not an easy mission and usually faces the resistance of different operating levels in the
organization. De Wit (1988) stated that it is still not clear how to measure
project success since project participants identify success or failure in
different ways. Lim and Mohamed (1999) indicated that project’s success should be observed from the
different perspectives of the individual client, developer, contractor, end
user and the public. PPP projects have different
phases and different stakeholders need to measure and specify the level of
project success and achievement of its targets (Hodge and Greve 2017).

 

The
origins of Key Performance Indicator can be traced to 1976 in an article
published by BusinessWeek. The article described a key indicator system based
on three concepts (Sanchez & Robert, 2010). The Centre of Construction
Innovation for Constructing Excellence (2006) defines KPIs based on each single
word forming the KPI terminology; “key” means how we define when a project is
successful, “performance” means how the success is demonstrated and “indicator”
means how to measure the success. Performance indicators have been described as
potential effectiveness attributes to measure overall effectiveness of PPP
system (Yuan et al., 2011).

 

PPP research in Egypt is very minor in the area
of critical success factors (Osei-Kyei and Chan, 2015) and nearly missing in
area of PPP performance measurement. As a result of missing standard method of assessing
PPP project performance in Egypt, and the lack of the historical performance
data, there is no PPP benchmark. The main aim of this research is to provide a
framework of measuring
performance of PPP projects in Egypt from the concession company’s point of
view. The detail works, including identifying the key characteristics of
PPP projects, classifying and prioritizing the key performance indicators for
PPP projects worldwide and especially in Egypt.

 

Research Methodology
 For
continuous improvement, it is necessary to design a measurement system with strong
performance indicators with capabilities
to measure the performance as well as supporting short and long-term strategic planning
for the organization. The effective performance measurement system is not a
matter of selecting the right measures, it also implies a major change in
decision-making processes and learning approaches implemented within an
organization.  In order to achieve the aim and objective of this
research, the research methodology is consisting of the following steps:

Study
Public Private Partnership projects and concentrate on the development of PPP
in Egypt.
Investigate
how the PPP project performance
could be measured from the concession company’s point of view.

A Questionnaire
and interviews with PPP experts are conducted to identify the most important
indicators.

Use
reliability analysis tests to check the internal consistency and
reliability of the results. 
Develop
a set of key performance indicators to measure the concession companies’ performance in Egypt by
using the weighted
average mean technique.

 

The results presented in this paper are expected
to enlighten governments in developing countries, especially Egypt, to fully
adopt the PPP performance evaluation systems from different stakeholder’s
perspectives which will control and enhance its future projects’ performance.

 

PUBLIC PRIVATE
PARTNERSHIPS – EGYPTIAN PERSPECTIVESThe level of a country’s
economic achievement is directly correlated to the level of adequacy in the
country’s public services. Developed countries have established good
infrastructure and are ready to further modernize them in response to the
rapidly growing public service demands, but this is not the case of developing
countries like Egypt. They are lacking far behind developed countries and are
generally still faced with great difficulty to barely suffice basic
infrastructures such as health and education. As a result, public services in
these countries, along with their economic performances, are relatively poor. Each
country takes its own path to developing infrastructure PPPs. Many factors play
a role in development,
including local geography, political climate, and the sophistication of the
capital market.  PPP projects as a concept
has a long history in Egypt starting from the Suez Canal project in 1859. With
the world tendency towards these types of projects, in 2006 the Government of
Egypt (GoE) adopted a new long-term policy of pursing partnership with the
Private Sector to offer a new source of investment capital and financing
required for infrastructure projects. 
Other goals were to reduce sovereign borrowing and associated risks and
reduce the burden on the budget without prejudice to State control and
possession of such facilities,
during the operation period
and even revert back at the end of the contract. The GoE established, PPP central unit
acts as a “Centre of Expertise” which is vested with the mission to introduce
and communicate the Public Private Partnership policy, to develop practices and
to take a vital role in the delivery of the initial projects. GoE issued Law no. 67 –
2010 and its Executive Regulations for Partnerships with The Private Sector which
states tender procedures and the
main clauses of the contract between the government & private sector.  Through the PPP
Central Unit many large projects were contracted or went under tendering/feasibility
studies. Another Egyptian model for PPP projects, established by the Ministry
of Housing and Urban Community, for provided areas for development companies to construct
communities. The developer manages, finance, construct and are responsible for
the project marketing. The Urban Community shares part of the revenue and agreed
percentage of the project built area, plus the gain from develop the new cities.  It became the general trend, especially in
new cities such as New Cairo and New Administration Capital.PPP PROJECT’S KEY
PERFORMANCE INDICATORSMost of the completed PPP
projects have been pronounced as successful, but the question is how effective
or how beneficial are these projects? Do they meet their performance
requirements? How are they valuable to stakeholders? How is PPP project
performance evaluated, in terms of project characteristics, financial and
marketing, innovation and learning, stakeholders and process indicators? For
PPP projects already completed and in operational phase or for those in
progress, there is a need to investigate the key performance indicators that
will measure and enhance their performance. It is important to define the key factors
that characterizes them and that has more influence on the project success (Critical Success Factors). These indicators,
which depend on the objectives of each project, are the basis of evaluation,
since they allow comparing actual performance with the planned, in terms of
effectiveness, efficiency and quality. These indicators are useful tools for
performance management.During the life cycle of the
PPP projects, the performance will change, due to several factors influence. Some of these
factors are static which would be traditionally fixed at the beginning of the
projects. The other factors are dynamic process-based which will be affected by
external environment or internal operational factors and will further influence
the performance. The life-cycle process-based evaluation is capable to not only
capture the dynamic feature of the project processes, but also offer
“real-time” monitoring of
the process and whole project performance (Haponava and Al-Jibouri, 2011). PPPs
always stress on VfM and innovation, therefore the factors that influence the
performance of PPP projects would be more complicated than traditional
construction activities, which should consider the integration of static and
dynamic factors and the benefits of different stakeholders to achieve VfM. Public Private
Partnership projects are different from normal construction projects in the presence of the concession company as the financier.
The construction phases of PPP projects are similar to any normal construction
project. Many studies investigate the issue of KPIs for PPP projects, Ismail
(2009) developed a study to define and prioritize the PPP KPIs in Malaysia. For
monitoring the PPPs project in Nigeria, Adenitis et al. (2011), developed
fifteen KPIs based on surveys submitted to various entities involved in
projects materialized with this contracting model. Yuan et al. (2011), select
31 KPIs based on his research to measure PPP projects’ performance. Based on these studies,
Public Private Partnership projects’ KPIs are classified into three main categories
and sub-categories:

Operational KPIs: are
intended to monitor the performance of the project during the operation phaseFunctional KPIs: serve to
monitor the performance of the PPP and are classified to the economic
component, social, environmental, learning and innovation, political and legal Professional KPIs: are
intended to monitor the performance of the professionals involved in project
e.g. engineers, architects, surveyors, contractors and suppliers Many studies were done before to measure the performance and define the
suitable KPIs for both the design and professional phases (Torbett et al. 2001,
Budworm 2009) and Molenaar and Navarro (2011).

For operational
KPIs, majority of performance studies give special attention to the
construction phase. It is the most critical phase and includes the majority of the project
risks and difficulties during the project life cycles. Many studies conducted to establish a framework of construction project
performance measurement and
define the required and sufficient KPI’s. A separate study was prepared by the authors of the most
important KPIs for construction projects taking into consideration the
organization size (Small – Medium – large) and type of projects (Heavy Civil –
Industrial – Building). The output was seven models to evaluate the overall
project performance.

 

Functional KPIs is the main objective of this study through defining the main
functional KPIs and ranking them according to the survey results. These 52 KPIs
are the summary results of the literature review of PPP projects or proposed by
the authors and PPP
experts during the pilot study. Figure 1 depicts the six main categories (Economic, Environment, Political,
Legal, Social, and Innovation and Learning) up to component level of the considered
52 functional KPIs.

 

QUESTIONNAIRE DESIGN
OF KPIS FOR PPP PROJECTS

 

A
questionnaire was designed to evaluate the performance or success for PPP
projects for the development
company or what named in these
types of projects “the concessionaire”.  The questionnaire titled “Questionnaire to develop a series of Key Performance
Indicators (KPIs) to Measure Performance of Egyptian Public Private Partnership
projects (PPP)”. The structure of the questionnaire consists of three
parts; the first contain personal information, the second the information about
the organization and
the third KPIs which are required to identify their priorities.

Author