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IJSTE - International Journal of Science Technology & Engineering | Volume 2 | Issue 08 | February 2016

ISSN (Online): 2349-784X

Negative Factors Adopting Public Private


Partnership for Highway Projects: A Case Study
of Gujarat
Shakil S. Malek
PhD Scholar
CEPT University, Ahmedabad, India,

Dr. P. V. Akalkotkar
Adjunct Professor
M. Tech. (CEM), Ganpat University, Ahmedabad, India

Abstract
This paper describes the findings from twenty interviews conducted in Gujarat and thirty-five interviews conducted in Hong
Kong and Australia with experts involved with Public Private Partnership (PPP) projects. The data of these twenty five
interviews of Hong Kong and Australia are collected from Esther Cheung (2009) with her prior permission. The findings from
these interviews were analysed according to the perspectives of the public sector, private sector and researchers. Within each of
these categories, the findings from Gujarat, Hong Kong and Australian interviewees were further compared. Many studies have
been done on PPP but there is very less information on the value for money, positive and negative factors for PPP projects
undertaken in road projects in Gujarat. The present chapter makes an attempt to identify and analyse these factors for PPP ro ad
projects in Gujarat. The paper specifically considers weather Public Private Partnership (PPP) should be used to procure highway
projects in Gujarat by analysing the negative factors for adopting PPP. A questionnaire was conducted with industrial
practitioners in Gujarat. The respondents were requested to rank the importance of thirteen negative factors for adopting PPP in
highway sector.
Keywords: PPP Projects, Negative Factors for PPP, Questionnaire survey, ANNOVA analysis, Chi -square analysis
________________________________________________________________________________________________________

I. INTRODUCTION
Pertaining to limitations in public funds needed to finance the required investment and the need to draw on the experience of the
private sector in order to improve the quality and efficiency of public services, such PPP agreement has been propelled. PPP
provide a chassis to work together for both public and private sectors in order to improve the purveying of public services
through the provision of infrastructure and related ancillary services for the development of infrastructure projects. PPP provides
transparent and competitive mechanisms that procreate the ideas, experience and skills of both sectors to meet innovative
solutions to community needs, expectations and hopes to purs ue development. An empirical questionnaire survey was conducted
in Gujarat (India). The survey respondents were asked to rate thirteen negative factors which influence the PPP projects.
There has been tremendous increase in liaison between private and public sectors for the operation and development of
infrastructure. Pertaining to limitations in public funds needed to finance the required investment and the need to draw on t he
experience of the private sector in order to improve the quality and efficiency of public services, such PPP agreement has been
propelled. PPP is a generic term for a variety of procurement methods that are alternatives to traditional procurement method s.
PPP refers to the participation of the private sector in the provision of public services. Public Private Partnerships offer a unique
and innovative method of involving the private sector in the nation building activity and in accelerating the delivery of pub lic
goods and services of high quality through joint enterprises, without spreading the limited available resources too thin. The
Eleventh Five Year Plan has estimated that in order to sustain the envisaged high annual growth rate, the investments in the
infrastructure sector will have to be of massive proportions. It would be impo ssible for the public sector to meet such huge
commitments in view of its limited capability for additional capital mobilization. The anticipated shortfall of at least 30 p ercent
of the estimated total plan requirements, which itself will be of a huge magn itude will have to be met by seeking active private
sector involvement in the development of the infrastructure sector. Public Private Partnership (PPP) will be an attractive op tion
in meeting this challenge [29].
The need for public-private partnerships in infrastructure has now become widely accepted. Inaugurating a workshop on PPPs
in Infrastructure Industries and Regulation held on April 10-11, 2006, Mr. Montek Singh Ahluwalia, Deputy Chairman, Planning
Commission, argued that this was mainly because of the greater efficiency with which private investors manage risks.
Governments
can raise funds in a variety of ways, but public entities tend to under-price risks and consequently levy low, insufficient and
unsustainable user charges for public services; private investors on the other hand are better equipped to assess market risks and
to anticipate changing needs, and respond with appropriate solutions. Injection of private capital and management with superi or
technologies leads to more efficient utilisation of resources thus releasing public finances for alternative uses. Mr Francisco da
Camera Gomes, Head of the Delegation of the European Commission to India, Bhutan and Nepal, noted the need for learning

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Negative Factors Adopting Public Private Partnership for Highway Projects: A Case Study of Gujarat
(IJSTE/ Volume 2 / Issue 08 / 005)

from international experience for policy making and drew attention to the EU India Economic Cross -Cultural Program that has
provided an opportunity for interactions between European and Indian civil society organizations [25].
Due to the growing gap between the financial needs and the available budget, gov ernments around the world try the
cooperation of the private sector in the construction of road infrastructure necessary to get through innovative approaches s uch as
public - private partnerships. The PPP allows the optimal use of the skills and activities in the implementation of the project, in
addition to sharing the risks and rewards of the operation involved, both public and private organizations. While the public sector
usually retains ownership in the structure retains the private sector decision rig hts is granted under development and project
management, as well as earn a reasonable return for an agreed period . The coalescing of entrepreneurship, management skills
and financial astuteness of the private sector with social responsibility, environment al awareness and local knowledge of the
public sector PPP should culminate in a better value for the public.
PPP projects are usually long-term concession contracts, which the expenditure is clearly how the quality of service and
measurable performance standards that indicate a direct relationship with the users of such projects based on. These agreements
authorize the licensee usually public property to be used for the construction of infrastructure projects. The dealer also ha s the
power to encroach fees from users for the use of public goods. However, the government remains responsible and accountable
for the provision of services to users. These projects therefore require close monitoring by the government to ensure that th e
provisions of the respective concession agreements and laws are enforced. In the management of a PPP project, the government
should ensure that the services satisfy the users for the agreed time, cost, quality and quantity. It is hence obligatory to have a
well-defined institutional structure adopted effectively to chaperon the contract. For this purpose, the requirements of the
monitoring and enforcement of the contract terms must be understood and addressed in relation to each concession contract. Th e
findings presented in this paper are part of a PhD research thesis, Model for PPP in Highway Projects.

II. LITERATURE REVIEW


For achieving successful PPP projects, some suggestions have previously been reported in literature. This section reports only a
few examples of how successful PPP projects can be achieved. In PPP contracts the government should be concerned that the
assets are procured and services are delivered on-time with good quality and meet the pre-agreed service benchmarks or
requirements throughout the life of the contract. Bu t it was observed that, the government should be less concerned with how
these are achieved and should not impose undue restrictions and constraints on the private sector participants. The governmen t
should be relegated to the primary role of industry an d service regulation; should be flexible in adopting innovations and new
technology; should provide strong support and make incentive payments to the private sector where appropriate. On the other
hand, the government should retain controls in case of default and be prepared to step in and re-provide the service if required
[1][6][8][10][19][21][30][32][34].
A transparent and efficient procurement process is required in lowering the transaction costs and reducing the time in
negotiation and completing the deal. Clear project brief and client requirements should be helped to achieve these in the bidding
process. In most cases, competitive bidding solely on price may not help to secure a strong private consortium and obtain value
for money for the public. The government should take a long-term view in searching the right partner
[6][8][12][16][17][21][27][34].
Successful PPP implementation requires a stable political and social environment, which in turn relies on the stability and
capability of the host government [33]. Political and social issues should be handled by the government as it go beyond private
sectors domain. It is legitimate that the private sector participants should be adequately compensated, if they victimised u nduly.
Many researchers identified that project financing is a key success factor for private sector investment in public infrastructure
projects. For taking up PPP projects by private sector, the availability of an efficient and mature financial market with the
benefits of low financing costs and diversified range of financial products would be an incentive [3][6][8][16][21][34].

III. R ESEARCH M ETHODOLOGY


A. Questionnaire Design:
This part of thesis will specifically consider whether Public Private Partnership (PPP) should be used to procure public works
projects in Gujarat. To analyze the attractive factors of adopting PPP, an empirical questionnaire survey was undertaken in
Gujarat, and compares it with Hong Kong and Australia. Although a large number of differences were observed between the
findings of the three jurisdictions. This result is logical as each jurisdiction will differ in practice, culture, geographic al location,
experience, tradition, politically, economically, socially etc. Hence it is of interest to compare these differences.
The questionnaire respondents were from three different sectors across the Gujarat, which are Public sector, Private sector a nd
Researcher. As shown in Figure 1 maximum respondent, almost half were from private sector that is 48%. And 27 % were from
public sector while 25% were from researcher. The reason behind maximum respondent from private sector is, in Gujarat the
public sector departments are few and common while numbers of private companies are there who worked with road sector
under PPP.

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Negative Factors Adopting Public Private Partnership for Highway Projects: A Case Study of Gujarat
(IJSTE/ Volume 2 / Issue 08 / 005)

Fig. 1: Primary role of questionnaire respondent

B. Collection of Research Data:


An empirical questionnaire survey was undertaken in Gujarat to analyze th e factors contributing to successful PPP projects, and
then compares it with Hong Kong and Australia. The survey was conducted from May 2013 to September 2013 in Gujarat, while
for Hong Kong and Australia same was from October 2007 to December 2007. The ta rget survey respondents of the
questionnaire included all industrial practitioners from the public sectors, p rivate sectors and researchers.
These respondents were requested to rate their degree of agreement against each of the identified factors contribut ing to
successful PPP projects according to a Likert five-point scale in which 1 is Least Important and 5 is Most Important. Target
respondents were selected based on their adequate knowledge in the area of PPP and their hands -on experience with PPP
projects, experience in conducting PPP research or have followed very closely with the development of PPP.
Survey questionnaires were sent to100 target respondents in Gujarat, 95 target respondents in Hong Kong and 80 target
respondents in Australia. It was anticipated that some of these target respondents would have colleagues and personal
connections knowledgeable in the area of PPP to participate in this research study as well; hence some of the respondents wer e
dispatched blank copies of the survey form. A total of 80 completed questionnaires from Gujarat, 34 from Hong Kong and 11
from Australia were returned representing response rates of 80%, 36% and 9%, respectively. In Gujarat out of 80 filled
questionnaires 16 questionnaires were rejected due to inadequat e response. The lower response rate in Hong Kong and Australia
were expected as the questionnaire was administered from Gujarat, hence geographical complications were perceived. But as this
paper mainly focuses on Gujarat, the responses received from Hong Kong and Australia was used for reference only.
The working experience of the respondent of Gujarat, Hong Kong and Australia is mentioned in Figure 2. For better and
perfect result tried to focus the respondents with rich working experience in the field of PPP road projects, directly or indirectly.
As shown in Figure 2, 42% respondents have more than 20 years of experience. Same way 41% respondents have experience in
between 11 to 20 years. Only 17 % respondents are there having experience less than 10 years. From figure 2 approximately half
of the respondents in Hong Kong and Australia possessed twenty -one years or above of industrial experience. It clearly shows
that the respondents from all three different regions were having very rich work experience, wh ich assures the value and
reliability of the findings.

Fig. 2: Number of years of working experience in Road sector for all respondents

C. Tools for Data Analysis:


The techniques that were used in this research paper, in respect of quantitative analysis include the mean score ranking
technique, Chi square and ANOVA analysis. The five-point Likert scale (1 = Least Important and 5 = Most Important) as

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Negative Factors Adopting Public Private Partnership for Highway Projects: A Case Study of Gujarat
(IJSTE/ Volume 2 / Issue 08 / 005)

described previously was used to calculate the mean score for each factor, which was then used to determine its relative ranking
in descending order of importance. These rankings made it possible to triangulate the relative importance of the factors to t he
respondents from India/Gujarat, Hong Kong and Australia as presented in Esther Cheungs survey (2009).
Analysis of Variance (abbreviated as ANOVA) is an extremely useful technique concerning researchers in the field of
economics, biology, management and other disciplines . This technique is used when multiple sample cases are involved. In this
paper three different cases of Gujarat, Hong Kong and Australia was involved.
Now before using the data for further analysis with the help of one tail ANOVA the validation of data is performed and the
output is mentioned in Table I and II
Table - 1
ANOVA Analysis Output-1 for Negative Factors of PPP
Factors

Count

Sum

Average

Variance

Reduce the project accountability

64

194

3.0312

1.491071

High risk relying on private sector

64

219

3.4218

2.279514

Very few schemes have actually reached the contract stage

64

173

2.7031

1.862847

Lengthy delays because of political debate

64

197

3.0781

2.0096

Higher charge to the direct users

64

226

3.5312

1.5863

Less employment positions

64

162

2.5312

1.4275

High participation cost

64

179

2.7968

1.1485

High project cost

64

194

3.0312

1.7450

A great deal of management time spent in contract transaction

64

176

2.7500

1.4920

Lack of experience and appropriate skills

64

169

2.6406

1.8211

Confusion over government objectives and evolution criteria

64

161

2.5156

1.4918

Excessive restrictions on participation

64

150

2.3437

1.6259

Lengthy delays in negotiation

64

152

2.3750

1.5396

Table - 2
ANOVA Analysis Output-2 for Negative Factors of PPP
Source of Variation
SS
df
MS
F
P-value
Between Groups

107.233

12

8.936098

Within Groups

1355.844

819

1.655487

Total

1463.077

831

5.397867

7.18E-09

F critical
1.763988

As mentioned in Table II for 12 degree of freedom (df) the F value is greater than F critical value, which shows that the
assessment by the respondents within each group on their rankings of negative factors is consistent. This finding ensures tha t t h e
completed questionnaires were valid for further analysis .
As shown in Table III Chi square analysis for 64 respondents of Gujarat, with 34 respondent of Hong Kong and 11
respondents of Australia was conducted. According to 12 degree of freedom and 0.05 level of significance, the critical value of
Chi-square were 21.026 for both groups the computed Chi-square values were all above the critical value of Chi-square (115.95
and 144.83 respectively). Therefore the assessment by the respondents within each group on their rankings of negative factors is
proved to be consistent, so data is accepted.
Table - 3
Chi square analysis for negative factors of PPP
Gujarat
Gujarat
Chi square Analysis
Hong Kong Australia
No. of survey respondents
64 & 34
64 & 11
Chi square value

115.95

144.83

Critical Chi square value (From Table)

21.026

21.026

Degree of freedom (dF)

12

12

Level of Significance

0.05

0.05

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Negative Factors Adopting Public Private Partnership for Highway Projects: A Case Study of Gujarat
(IJSTE/ Volume 2 / Issue 08 / 005)

IV. R ESULTS AND DISCUSSIONS


A. Discussion of Survey Results:
In Gujarat/ India, whenever road project completed with BOT/PPP the amount of high toll charged to users directly. If project
get delayed then the toll collection period will also extended. In fact it had been observed in so many place of India that a fter
completion of the toll collection period also users get charged. Such problem faced by Indian/Gujarat government only and that
is why Hong Kong and Australian respondent gave very less importance to this factor.
The second negative factor as ranked by Gujarat respondents was High risk relying on private sector. Again its the
drawback of our policy framework. In India/Gujarat during PPP project the risk sharing mechanism is not proper. The result
clearly shows that the risk rely on private sector is quite high compare to public sector. And it is obvious also as they are
investing huge amount of money. This criterion was also not highlighted by Hong Kong and Australian respondents.
In Gujarat and Hong Kong as well, public works projects are often delayed and complicated by the need for public
consultation; hence it is not surprising that Lengthy delays because of political debate was the third negative factor rank ed by
the Gujarat respondents and first by the Hong Kong respondents. This problem is well known for causing projects to be held
back. The Australian respondents also give it importance and ranked it on fifth position.
Rank fourth by Gujarat respondents were Reduce the project accountability and High project cost, as both are getting
same response. In Hong Kong and Australia this factor was ranked of mediocre importance only at twelfth & eleventh and
eleventh & ninths position respectively, showing that they do not face the similar problem that Gujara t does.
Another observation manifested that Less employment positions was ranked within the bottom three of the rankings for all
three jurisdictions. The respondents shared the same views on the negative factor they believed to be of less threat. The low
ranking of Less employment positions has shown that employment has not been affected irrespective of how projects are
procured.
For the negative factors rated by respondents in Gujarat the mean values ranged from 2.34 to 3.53. The variation in responses
was 1.19. On the other hand, in Hong Kong and Australia it was found that the mean values obtained ranged from 2.79 to 3.82
and 1.36 to 3.45 respectively. The variations in responses were 1.03 for Hong Kong and 2.09 for Australia. Both variations we re
differing than that for Gujarat. It was also found that in general these negative factors were rated higher by Gujarat responden ts.
It can thus be interpreted that the Hong Kong and the Australian respondents found that these negative factors were less of a
challenge. This finding is logical as discussed previously Australia is much more experienced in delivering PPP projects
compared to Gujarat.
The respondents were asked to rate the thirteen negative factors according to a Likert scale from 1 - 5 (1 = Least Important and
5 = Most Important), therefore a value above 3 would represent that the negative factor is of importance. The results show that
in Gujarat there were eight negative factors below a score of 3. On the other hand in Hong Kong and Australia there were two
and ten respectively below 3. Again this consolidates the fact that the Australians are much more confident at conducting P PP
projects, hence they are less conservative.In addition, on top of those factors the respondents were asked to rat e, they were also
given the opportunity to add others which would be of importance, but they did not do.

V. CONCLUSION
A Thirteen negative factors for adopting PPP were rated by the survey respondents. The top five negative factors ranked by
Gujarat respondents included:
1) Higher charge to the direct users;
2) High risk relying on private sector;
3) Lengthy delays because of political debate;
4) Reduce the project accountability; and
5) High project cost.
It was also found that in general these negative factors were rated higher by Gujarat respondents. It can thus be interpreted that
the Hong Kong and the Australian respondents found that these negative factors were less of a challenge. This finding is logical
as discussed previously Australia is much more experienced in delivering PPP projects compared to Gujarat.

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