Comparative performance of PPPs and traditional procurement projects in Indonesia

Abstract

Purpose The purpose of this paper is to investigate the outcomes of Indonesian power projects as representative projects of Asian emerging economies that were procured via public-private partnerships (PPPs) and traditional public sector procurement. Power generation infrastructure delivery in emerging economies frequently seeks private participation via PPPs as one of the key mechanisms to attract private finance. Undertaking a comparative benchmark study of the outcomes of Indonesian power projects provides an opportunity to explore the historic evidence as to whether PPPs deliver better outcomes than traditional public procurement in emerging economies. Design/methodology/approach This paper reports on a study of the performance of 56 Indonesian power projects procured via either PPPs or traditional procurement. First, it focusses on project time and cost outcomes of power plant facility during construction and commissioning and then extends this comparison to consider the operating availability of power plants during their first two years of operation. Findings The results indicate that PPP projects had superior time and operating availability to those procured traditionally whereas no significant differences were identified in the cost performance between PPPs and traditionally procured projects. These findings highlight the importance of adopting policies that are supported by broader sources of international financiers and high quality power plant developers. Research limitations/implications The quality performance analyses of projects (based on equivalent available factor indices) were limited to the power plants in the Java-Bali region where the majority of projects are large scale power plants. Practical implications This study provides an empirical basis for governments of emerging economies to select the most beneficial procurement strategy for power plant projects. It highlights the importance of selecting experienced providers and to adopt policies that attract high quality international project financiers and power plant developers. This includes the need to ensure the commercial viability of projects and to seriously consider the use of cleaner power technologies. Originality/value This study is the first to compare the outcomes of power projects in Asian emerging economies delivered via PPPs against those delivered by traditional public procurement that includes consideration of the quality of the delivered product.

Impact of funding on cost-time aspects of public and social buildings

“…The key question is whether the PPP model can really enable a more successful realisation of the public building construction program, as compared to the traditional model. Numerous studies have been conducted worldwide to answer this question (Table 1) [13][14][15][16][17][18][19][20][21][22]. In addition to public service buildings, these studies also focus on other infrastructure projects.…”

“…Apart from procurement model, the buildings also differ according to their occupancy, technical and architectural complexity, type of construction contract, total construction cost, etc. GRAĐEVINAR 71 (2019) 1, [21][22][23][24][25][26][27][28][29][30][31][32] Utjecaj načina financiranja na troškovno-vremenske aspekte javnih i društvenih građevina Building characteristics, i.e. the building data considered significant with regard to the theme and objective of the research, are briefly presented in Table 2.…”

“…Some authors [8] define the value for money as the best combination of the quantity, quality, features and costs as expected throughout the entire life-cycle of the project, or it is often simply stated that the value for money is the real value for the funds invested. The [11] GRAĐEVINAR 71 (2019) 1, [21][22][23][24][25][26][27][28][29][30][31][32] Impact of funding on cost-time aspects of public and social buildings public sector cost comparator is defined in the Public-Private Partnership Act [9] as the comparison of the present value of total costs within the specified time of the project according to the traditional procurement model, as compared to the same type of costs based on the PPP model. If the expected present value of total life-cycle costs based on traditional model is higher that the total life-cycle costs according to the PPP model, than it is considered justified to procure the building according to the PPP model as it can reasonably be expected that the implementation of this model will lead to savings in public expenditures [10].…”

“…In case of PPP model, the client incurs costs during the use of the building and this in form of a fee that is dependent on the extent of services that have been agreed upon [2]. International research focusing on comparison of construction projects as related to procurement model used, reveals greater success of PPP projects in terms of costs, time, quality aspects and maintenance of buildings, when compared to the traditional model [13][14][15][16][17][18][19][20][21][22]. This research is also of interest to the Republic of Croatia, and the present paper is a contribution in this direction.…”

“…Comparison between traditional and PPP procurement models based on construction cost variation coefficients per square meter of gross areaThe coefficient of variation of construction cost per square meter of gross area amounts to 36.7 % for PPP buildings, while GRAĐEVINAR 71 (2019) 1,[21][22][23][24][25][26][27][28][29][30][31][32] …”