Procurement Challenges of Public Private Partnership

By Angshukana Datta,*

Alumnus NIILM CMS batch of 2011

angshukana@gmail.com

(This article was published in the ICAI Student Journal May 2013

Introduction

Public Private Partnership (PPP)’s are instruments for government bodies to deliver desired outcomes to the public sector, by making use of private sector capital to finance the necessary assets or infrastructure. The private sector partner is rewarded for its investment in the form of either service charges from the public body, revenues from the project, or a combination of the  projects  that  might  not  otherwise  have  been feasible, because the public body was unwilling or unable to provide the requisite capital.

PPPs allow the private sector to play a greater role in planning, finance, design, operation and maintenance of public infrastructure and services than under traditional public procurement models. Moreover, where traditional procurement models begin with the question of what assets the public body has as  its disposal  and  how these might be used to  deliver required services,  PPP  arrangements  place  the emphasis on the desired  service or outcome as identified by the public organization and how the private sector might help to make this happen.

Generally, all nations use a competitive procurement process for the selection of PPP contractors.  The principal difference between the countries is the extent of negotiation that occurs during procurement.

The  basic  objective  of  the  public  procurement  of public-private  partnership  is  to  obtain  a fair, competitive,  transparent and non-discriminatory procurement. Procurement usually involves a bidding process in which the bidders or sellers quote their prices and the buyer accepts the lowest possible bid.

The most efficient and cost effective method of procuring goods or services is on the basis that quality of the goods meets the buyers’ requirement.

Examples of Global Best Practices of PPP Procurement process

The Portuguese Procurement Process involves a two stage competitive procurement to select its preferred bidder.  The bids are evaluated based on technical quality, government’s contribution, risk allocation and management plan. They evaluate the bids and short- list two bidders. They negotiate and select the preferred bidder. A contract award is then made which is followed by financial closure.

The Spanish Procurement Process involves an open competition model for procurement. The criteria’s involved for bid evaluation are technical qualities and economic conditions for the proposal. They receive binding bids and select the winner. The competitive and efficient approach clearly states its expectations as well as the terms and conditions of the project.  It attracts too many bidders and saves transaction costs. The United Kingdom’s Procurement Process involves negotiated procurement.  Multi-stage competitive process takes place. The various stages of the process includes prequalification, tender, negotiation and contract award. Then they negotiate and select the preferred bidder from the short listed ones.

The Australian Procurement Process involves multi-stage competitive procurement. The criteria involved are tolling structure, concession length, design features, etc. They negotiate and select preferred bidder from the short list. The State requests a conforming proposal along  with  non-conforming  proposal.  This allows private sector to bring new projects.

The Indian Procurement Process consists of the qualifying Expression Of Interest (EOI)  process, covering the Request For Qualification (RFQ) and short listing takes place which includes the final drafting of the key bidding documents as well as the contents of the Request for Proposal (RFP). The requirements and process for the Readiness check and the application for Final Approval take place. The bidding process covers RFP and bid  evaluation which is followed by contract finalization and awards

Procurement Challenges of PPP in India

Strategies used in  countries  that  have  improved procurement efficiency costs are:

·     Greater standardization of contracts, with contracts being rolled forward to subsequent projects without substantive amendment.

·         Architectural design and design innovation were given less emphasis.

·         The substantial contributions towards bid costs.

·         Avoidance  of  further  bid  stages  and  rigorous adherence to the project timetables.

·        More reliance on the preferred bidder who is developing  its  proposal  (both  before  and  after commercial close) as well as on the protections within the project contract.

The source of value for money can be through less focus on third party income or development gains.

Findings

By and large, the procurement process in the countries covered under this discussion is transparent and auditable.  It is streamlined but flexible in nature. However, in the case of India, model documents of RFQ, RFP and contract/bidding documents are used. This leads to an element of rigidity in procurement practice and, at times, detracts the private sector and delays the process.

The degree of commitment to the PPP procurement process and expertise of government  project teams directly impacts decision-making efficiency and the overall  time-frame  taken  to  complete procurement processes.

Although process inefficiencies and bid costs are in themselves a barrier to competition, the key issue in PPP market is the irregular availability of information pertaining to project pipeline and the current inability of existing and potential new market participants to undertake  an  informed  assessment  of  the  likely opportunity in respect of PPP projects.

Way Forward Barriers to Competition

To develop an effective PPP procurement process through providing opportunity to  potential new market participants to undertake an informed assessment of the likely opportunity in respect of PPP projects, it is suggested that:

·   early announcement of potential future PPP projects more consistent and rigorous application of the National PPP Guidelines on the criteria for determining whether PPP  procurement  is appropriate for a project

·         continued commitment and leadership from politicians and senior bureaucrats and each of the various jurisdictions in support of the use of PPPs inappropriate circumstances

·      where possible, continued focus on improving co-ordination of the release of projects to the market by greater liaison between jurisdictions, acknowledging the difficulties in achieving this.

Efficiency of the PPP Process and Reduced Bid Costs

Bid  costs  would  become  less  of  an  issue  with  a stronger and more certain PPP project pipeline, but inefficient processes continue to impact the value for money outcomes  achieved   by  governments, irrespective of the pipeline. Accordingly, the following  initiatives may be considered to improve efficiency and reduce bid costs (as well as government transaction costs) that remain a key priority:

·    rationalizing information requested that is neither required to evaluate bids nor required  for certainty at contractual close, particularly that relating to some aspects of design and to general corporate processes.

·   recruitment, development and retention of high quality Government project team  members,  in particular  the  project  director and key team members responsible for managing each of the various disciplines.

·         ensuring  governance  structures  empower the project team to deliver the project while enabling effective and efficient decision making so as to prevent unnecessarily protracted and uncertain time frames.

·      only using more than one bid stage where absolutely necessary, either because of changed market conditions or where no bidder has made an acceptable proposal.

Conclusion

PPP procurement and implementation can be lengthy and costly, making it unsuitable for some projects.

The inefficiency  in  the  procurement  process negatively impacts value for money outcomes, as these costs are  included  within  the  overall  tender  price which  continues to add to  government’s internal transaction costs. The average procurement timeline for infrastructure projects plays an important role for successful completion of PPP projects. An efficient procurement helps PPP construction projects to focus on  their  delivery  at  the  expected  time,  price  and quality.

References

Abadie Richard and Howcraft Adrian, “Developing PPP in New Europe”, PricewaterhouseCoopers Report on PPP in Europe, 2004.

G. Gopala Krishna Murthy, “Text and Cases on Infrastructure Financing: Trends,  Challenges  and Experiences”.  Murthy Gopala Krishna published by ICFAI University Press, 2010.

Infrastructure Australia- PPP Procurement, KPMG Corporate Finance (Aust.) Pty. Ltd., May 2010.

Public Private Partnership (PPP) Handbook, Asian Development Bank, Sep 2008.

Angshukana is a Research Analyst at Intercontinental Consultants and Technocrats(ICT), an Engineering Consultancy Firm in New Delhi

University of Poitiers exchange program of NIILM CMS students in June, 2012

NIILM-CMS offers a collaborative course with IAE de Poitiers, University of Poitiers, France to the students to achieve a degree of Masters in International Management from the 500 year old University of Poitiers.  16 students went as the fourth batch to the University in France and attended classes during May-June 2012. 

NIILM CMS faculty having lunch with Prof. Jerome and his wife at the campus

They had written exams and were evaluated on 6 subjects which they successfully passed.   Professor Jerome Meric came to NIILM-CMS in the month of April,2013 to complete the evaluation procedure for 16 students based on Dissertation thesis   and viva voce.  The theses were much appreciated and got graded by him. They were also approved by the IAE board of studies and grades were approved. This degree is recognized all over Europe and can help students to fetch a job in Europe if they wish to work there later on.

Dove: A viral campaign that urges women to have greater self-esteem about their appearance

Dove's new campaign about how women are more beautiful than they actually think they are

Women are their own worst beauty critics. Only 4% of women around the world consider themselves beautiful. Dove wants to create a world where beauty is a source of confidence, not anxiety. So, the brand decided to conduct a compelling social experiment that explores how women view their own beauty in contrast to what others see.

Overview of Soft Computing

Prof. Manjeet Kumar* writes about Soft computing. 

Prof. Kumar is a faculty in the area of IT at NIILM CMS. He can be contacted at manjeet@niilm.com 

Soft computing is the state-of-the-art approach to artificial intelligence, and it mainly comprises fuzzy logic, neural networks and probabilistic reasoning. It aims at mimic human reasoning particularly in computer milieu, and hence in practice, the Soft computing systems are adaptive and intelligent in nature.

Soft computing has also a user friendly Interface in the world of computing.

The main constituents of soft computing are-                            

·                     Fuzzy systems or Impression

·                     Neural Networks or Learning

·                     Probalostic Reasoning or uncertainty

·                     Evolutionary Computing or optimization

Fuzzy Systems

A fuzzy  system is a system based on fuzzy logic - a mathematical system that analyzes analog input values in terms of logical variables that take on continuous values between 0 and 1, in contrast to classical or digital logic, which operates on discrete values of either 0 and 1 (true and false).

The main Function of Fuzzy logic is to deal with Imprecision and Uncertainity.It also deals with imprecise entities in automotive environments. It is based on fuzzy sets and Fuzzy logic.

What is a Neural Network?

An Artificial Neural Network (ANN) is an information processing paradigm that is inspired by the way biological nervous systems, such as the brain, process information. The key element of this paradigm is the novel structure of the information processing system. An ANN is configured for a specific application, such as pattern recognition or data classification, through a learning process.

Probabilistic reasoning

In a probalistic neural network (Bayesian learning) probality is used to represent uncertainty about the relationship being learned. Before any data is seen the prior opinion about what the true relationship might be can be expressed in a probality distribution over the network weights that define this relationship.

Therefore proballistic reasoning is done to make a solution of an uncertainty using a Bayesian Network.

Evolutionary Computing

 Evolutionary computing is the field of study devoted to the design, development, and analysis of problem solvers based on natural selection. It is the field which is based on the study of techniques used for problem solving like its development, design and analysis.

Advantages of soft Computing

*    models based human reasoning

*    models can be

-                      linguistic

-                      simple

-                      comprehensive

-                      fast when computing

-                      good practices

Soft Computing Today

1.                  Computing with words(CW)

2.                  Theory of information granulation(TFIG)

3.                  Computation theory of perceptions(CTP)

Possible Soft computing data and operations

1.                  Numeric data: 5, about 5, 5 to 6, about 5 to 6

2.                  Linguist data: Cheap, very big, not high, medium or bad.

3.                  Functions and relations: F(x), about f(x), fairly similar, much greater.

Conclusion

We hereby conclude that the soft computing method is the only way to compute in better and accurate way as it is more suitable than hard computing.

To know more about the soft computing, visit http://www.springer.com/series/2941

He is an M.Tech in IT and has a work experience of more than 8 years. He had worked in various fields like research, consultancy and academics.. He has several professional trainings in Information Technology. His research area includes Data Mining, Web Technology, ERP, Operating System, TQM. He Published 10 papers in National Conference/Seminar and 4 Papers in International Journal.

Surviving disruption in retail equilibrium

Prof. Mohit Maurya*, Professor of Marketing at NIILM CMS writes:

The author can be contacted at mohit@niilm.com

E-commerce will soon become everything from something. We are witnessing how the line between e-commerce and store retailing is gradually fading, and by and by e-commerce and online retailing is just becoming a natural part of retailing. The consequences are huge as a USD 500 billion online world is transformed into a USD 8–10 trillion global retail market.

This generates a lot of questions about what form of retailing will evolve in the future. What role will bricks-and-mortar stores take up? What business models will be flourishing? Who will endure the technological onslaught and who might perish? But for sure; the world of retail will look very different a decade onwards.

Retail sales in the US and many European markets are still below the levels seen before the onset of the financial crisis in 2008. Moreover, labor costs in China are increasing rapidly while the price of oil and other raw materials has soared. This has created an environment in which retailers are competing within a shrinking space looking for answers to procurement options, geopolitical scenarios and scalable formats.

There is a slugfest amongst retailers with different formats to gain market shares and to push competitors out by attracting customers either with better value for money (substantial discounts) or convenience. And with the online commerce thriving, the idea is that you need not big to succeed. Ebay and Amazon have brought retailers like Target and Comet on their toes. The double-digit growth of online retail sales seen in U.S. and other places is part of this change. Online retail is evidently growing at the cost of traditional retail outlets. The reality that this is happening at a time when the industry is under pressure is likely to expedite the metamorphosis that is already happening. This is not just a simple question about e-commerce replacing traditional stores, but a complex process involving several interacting trends.

The drivers of change include a concoction of deleverage and prudence in the face of lower economic growth, demographic change and shifting consumer behavior and expectations, combined with new technology and social innovations. 


With an unprecedented level of entropy and dynamism retailers can look forward to these change drivers to plan their future strategies:

·         Aging and tech savvy.

·         JIT - Just In Time even for personal consumption.

·         Always online.

·         Mobile retailing.

·         Social commerce.

·         Multichannel or Omnichannel world.

But it is certain that in order to survive disruption, managers of legacy businesses need to know the game to be a part of the changing game. And probably knowing these drivers would equip them in a better way.

*Dr. Mohit Maurya

A PhD in Retail Management, Dr. Maurya has an experience of more than a decade in academics, corporate training and consulting. Some of his previous associations were with Indian Retail School, Siddaganga Institute of Technology, Kirloskar Institute of Advanced Management Studies and ICFAI University. He has also worked for Jubilant Organosys Ltd. He has trained over 200 executives of various companies like JSW Steel Limited, Trident Powercraft Private Limited, GMR Infrastructure, Adecco India, Seminis, Monsanto Agro, Kirloskar Brothers Limited, Kirloskar Oil Engines Limited, Kirloskar Pneumatic Co.ltd, Kirloskar Ebara Pumps Limited, etc. His consulting interests are in Negotiation Skills, Sales & Distribution Management and Services Marketing, while his research interests are in Organized Retailing and Virtual Marketing.

Segmentation strategies of Titan watches: Story of Fastrack

Profs. Arun Kumar and N. Meenakshi write...

Authors can be contacted at ak2605@gmail.com, n.meenakshi.n@gmail.com

Market segmentation in the watch industry is gathering speed. India’s leading watchmaker, Titan is sprucing up the emotional connect it has with customers by giving aggressive brand identities to various products in its portfolio. Its advertisement campaign for FasTrack - ‘Are You On It?’ - carries the first vignettes of branding for this aspirational product range targeted at the youth. The storyboard centers around a Formula-1 racer who gets out of the party groove in time to join Narain Karthikeyan, India’s most celebrated figure on the racing tracks, for a training session in the evening. Karthikeyan’s presence in the commercial is incidental given the context. But, India’s top racing driver is the brand ambassador for the Tatas, who hold a majority stake in Titan Industries Ltd.

After 15 years of signature campaigns centering around Titan, which built a formidable house brand, the winds of change are blowing. The product labels within the Titan umbrella are slowly gaining distinct identities in an obvious attempt to accommodate the changed demographic compulsions and market dynamics. Titan has a set of product labels catering to different market segments, which can script their own brand stories. Currently, the Titan umbrella has well-established product categories such as Edge, Steel, Dash, Nebula, Classique, Royal, Regalia and, of course, FasTrack.

There is a reason why the brand story has been scripted for FasTrack. Titan, which is 15-years-old as a brand, has moved up the age spectrum. Many Titan customers have now become parents. Their children respect Titan, but they do not buy the brand. Titan is aware of the trap and is strategizing to attract new customers in the market. It is on a contemporarising  mission. So, FasTrack is being positioned to bring the new and young Indian customer into the company fold. This would provide an opportunity to convert them into “classic Titan customers” in the long run. FasTrack is the fashionable face of Titan. And it is now building an identity for itself unlike Classique or Royal. The company has identified the youth segment - youth by age and youth by attitude - aged between 18 and 30 years, as the core audience of FasTrack. These customers are bold, individualistic, non-conformist and fashionable. It marks FasTrack’s growth from being a product category to a sub-brand of Titan.

FasTrack first hit the market as ‘Cool Watches’ from Titan. It came with a frosted steel look and was targeted at customers in the age bracket of 22-30 years. In later years, FasTrack’s focus shifted further down the age spectrum, to those between 15 years and in their early 20s. This resulted in the Digital Collection (communicated as ‘Too Sexy For Your Wrist’) that included big, bold and techno-kind of watches. Later, it came out with the Fashion Collection, mainly aimed at wooing more female customers. The latest ‘Are You On It?’ campaign is an effort to showcase the subtle changes in FasTrack.

Fashion, which is contemporary, and couched in ‘the desire to live life to the hilt’, is touted as the main thrust of FasTrack’s branding initiative. The company looked  at the different attributes of fashion - sexy, individualistic, irreverent - but finally decided to build on the ‘work hard, play hard’ platform. It reflects the balanced attitude of the youth today.

The company has backed the campaign by creating a range of aspirational products targeted at this group. To the company, new fashion centers around shapes such as  rounds, ovals and squares; colors in terms of leather straps, dials and textures; and material such as metal, leather, hybrids, silicon or synthetic. For instance, FasTrack’s latest offering has quite a few square models in an array of colors, and the materials used include new age supplies such as silicon and synthetics. If FasTrack is on a customer, it must form an impression and make others ask about it. In terms of product attributes, FasTrack is identified as bold, bright, elegant and as something that stands out. In its new avatar, FasTrack will reach out to the customers differently from the way Titan does it.

Its media plan covers television music channels, select magazines and a significant online presence. On the retailing front, it hopes to be present in youth hangouts, which include the leading music shops, and also in some Internet cafes. This is apart from leveraging Titan’s extensive retail network covering about 92 cities and urban centers in the country.

The company says it has spotted a distinct opportunity as most products in the fashion segment carry a price tag between Rs 3,500 and Rs 7,500. This is not within the first-time reach of many. Titan is expected to pitch hard in the price bracket ranging between Rs 1,000 and Rs 2,500. It also enables the target - young customers, mostly in the SEC A and SEC B segments, to mull new purchases to keep pace with changing fashion. The ownership levels are higher among young Indians, especially in SEC A & A1 segments, and many already own more than one watch at any point in time.

Sales have picked up and FasTrack is growing on the branded curve. Meanwhile, Titan may allow more product categories under its umbrella brand to acquire a more decisive role as sub-brands. Nebula, a gold watch in the luxury segment, may follow suit. FasTrack is a pointer that Titan is ready to correct its branding strategies and follow market dynamics.

To know more about the brand, visit http://fastrack.in/
http://www.youtube.com/user/fastrackworld

NIILM CMS IN BUSINESS TODAY “Should I Choose Marketing or HR - Which one is better?”

Excerpts from an interview given to Business Today for B-School Compendium Issue 2013 by Prof.S. Neelamegham, President, NIILM Centre for Management Studies.

How do you suggest the aspiring MBA students to decide if they are fit for Marketing or HR professional?

Human resource managers essentially deal with “People Management”. This includes recruiting, training and development, performance evaluation, negotiation, employee relations, assisting in policy and strategy formulation and consultancy. HR personnel have a direct influence and impact on the people working in a company. Those who enjoy networking with people, warm and sympathetic and good in perceiving the moods, feelings and reactions of others and enjoy tackling problems with logic will be found more suitable for HR professional career.

Marketing is a dynamic function and it is growing in importance. It covers a wide variety of functions including selling, advertising, promotion, marketing research, distribution, retailing etc. Those who have good communication and persuasive skills, enjoy meeting face to face with customers for selling products or services, willing to work hard, energetic and single minded , creative and  with  a strong imaginative sense  will find marketing profession more exciting.

What should the  students expect after post graduating in Marketing? (In terms of the profiles industry competition, salary packages etc).

For those who qualify in Marketing a variety of opportunities are available across a wide spectrum of industries including FMCG, Consumer Durables, Service sectors ( Banking, Telecom,  Insurance, Retailing , real  estate, Hospitality,Tourism) et  besides social media and communication, marketing research ,, and international trade. SME s is also looking for Graduates specialised in marketing. The salary range may vary between 2 lakhs to 20 lakhs per annum depending upon the merits of the candidates and the entry level.

 What is your take on myths about HR as a profession? (Common myths are HR is for women, HR pays you less with less growth options, HR is a laidback profession and is less important, HR is chosen by default when the person is not interest ted in any other field.

It is estimated that 60% of HR jobs across industries are held by women.  Human Resource is found more suitable for women since they are adept in counselling and nurturing skills, people focused and team oriented   which are essential to create a more conducive environment for greater productivity at work.   However the number of men  entering the profession is also on the increase  and the situation may change over a period of time as it has happened in other countries. HR may appear to be a little less glamorous compared to marketing but there are enough opportunities for growth in HR profession. Whether it is manufacturing, soft ware or other service sectors, NGOs and other non profit organisations, Consultancy, Media and communication the demand for well trained HR personnel is fast increasing.

FUTURE OF HR INDUSTRY     

Human resources industry in India has grown at a compounded annual growth rate of 21% over the past few years and is pegged to be around Rs 22,800 cores according to a recent study. It is a maturing industry .Many global companies are in search of talent to reduce costs and this is creating demand for more HR professionals to recruit, develop and nurture talents across the globe. Several multinationals are also outsourcing human resource processes to India.

 The emergence of Social media as a powerful net working tools help HR professionals to create communities across the globe for sharing knowledge and support employees through new means of communication.  All these developments point out the growing job opportunities in HR area.

Any other suggestions?

One should try to work out one’s strengths, aptitude and values to avoid any job mismatch. Winning is about utilising your strength in full. At the same time to climb up the ladder, one should minimise weaknesses through determined efforts, training and experience. Last but not least we are living in a world of accelerated change. To succeed in any career one should be ready to accept the challenge of change and develop capacity to continuously learn and adapt to the new environment.