The main aim of the preliminary system dynamics model is to identify the various sustainability issues under the respective deliverables of the PPP process. Furthermore, the relationships between the shortfalls and the sustainability principles along with the various causes and consequence have been defined through construction of feedback loops. Figure 7.2 shows the balancing feedback loops (B1 to B11) integrated in the conceptual model of PPP procurement process. It could be observed from the preliminary system dynamics model that the identified shortfalls are relating to the four key deliverables of PPP process.
These deliverables are further divided into sub-deliverables which are treated as variables
EIA, SIA and VfM analysis
Feasibility S tudy
P&E team, Bid documents (RFP
& CA) Procurement
Preparation +
Bid invitation, Bid evaluation Bidding Contract award,
Contract agreement
Contract Finalisation
+ +
+
to model them as loops (B1 to B11) expressing how these adversely affect the sustainability principles. The sustainability principles adversely affected by the shortfalls have been represented in the preliminary system dynamics models with a ‘Rectangular Box’ in Figure 7.2. Brief discussion about how the sustainability principles that have been adversely affected by the shortfalls have been modelled using system dynamics model through CLDs is given in the following sub-sections.
Failure of socio-ecological system integrity in EIA and bid evaluation:
EIA in PPP procurement process is a part of the feasibility study to assess the impact of the project on the surrounding and community. But, the current EIA carried out during the feasibility study assesses only the acceptable impacts on the project while avoiding consideration of the social and environmental benefits to the community and surrounding, respectively. Limitations in the EIA assessment adversely affect accomplishment of sustainability principle ‘socio-ecological system integrity’. The negative impact of the EIA has therefore been represented as a negative or balancing feedback loop (B1) in the preliminary model. Similarly, the bids submitted by private entities in response to the call for request for proposal (RFP) have been evaluated with respect to technical and financial aspects only. This evaluation fails to take into consideration environment and social (E&S) aspects and this adversely prevents fulfillment of the prerequisites of ‘socio- ecological system integrity’ principle of sustainability. This effect has been modelled in the preliminary model as a balancing feedback loop (B6) showing the negative dynamics behavior on procurement preparation.
Inefficient resource utilization in VfM analysis:
PPP due diligence activity is a part of the feasibility study to evaluate the project with respect to risk allocation, financial viability and value for money (VfM). The current risk evaluation model in VfM analysis fails to take into account future unforeseen risks of the project. Furthermore, E&S externalities and costs have not been given due weightage in the whole life-cycle costs (WLC) evaluation for VfM analysis. These adversely affect
‘efficient resource utilization’ principle of sustainability. These effects have been shown as two balancing feedback loops (B3 and B3’) in the preliminary system dynamics model.
Another complaint from the private sector has been regarding less incentives to private sector for adopting energy efficient system. This lack of incentives affect the efforts to
optimize the project performance to achieve sustainability goals. This effect has been shown in the preliminary model using a balancing feedback loop (B5).
Failure of socio-ecological civility and governance in stakeholder management:
In PPP procurement process, various stakeholders are involved for effective completion of all the four deliverables. For instance, stakeholders like local people and NGOs can play an important role in social impact assessment (SIA) conducted as part of the feasibility study to highlight the key challenges expected to be faced by them. However, their viewpoints have been not sincerely taken into consideration during SIA study and this affects ‘socio-ecological civility and governance’ principle of sustainability. This negative system behavior on the feasibility study has been modeled as a balancing feedback loop (B2) in the preliminary model. The procurement team (P&E team) is another stakeholder who plays a key role in procurement preparation. This team, however, lacks knowledge about sustainability and do not give much importance on promotion of innovation in procurement process. This seriously affects ‘socio-ecological civility and governance’
principle of sustainability and negatively on system behaviors of procurement preparation (shown as balancing feedback loop, B4). Finally, the lack of transparency during bidding and goal conflicts during contract finalization also negatively affect the system with respect to ‘socio-ecological civility and governance’ principle of sustainability (shown as balancing feedback loop, B10 and B11).
Inadequate precautionary and adoption measures in MCA:
The public sector, though, has managed and allocated various risks amongst the public and private sector through the model concession agreement (MCA) but the risk allocation norm regarding future unforeseen risks relating to climate change impact on the project is outdated. Also, there are various complaints from private sector that the current MCA is a very rigid contract in terms of lack of flexibility to mitigate the future unexpected risks of the project. These issues fail to promote ‘precautionary and adoption’ principle of sustainable development and lead to negative system dynamics behavior thereby represented in the preliminary model using a balancing feedback loop (B8).
145
Figure 7.2: Preliminary system dynamics model for sustainability issues in PPP process
Feasibility Study PPP due
diligence study Value for money
(VfM) analysis Whole life- cycle
costing (WLC) Absence of
E&S externalities
& cost Outdated risk model
Inefficient resource utilization
Inadequate WLC for VfM +
+ +
-
+
+
- -
+
Environment
& social (E&S) feasibility
Environmental impact assessment
(EIA) Social Impact
assessment (SIA)
Acceptable impacts practice
(E&S benefits missing) Stakeholder’s
opposition
Failure of socio-ecological system integrity
Failure of socio-ecological
civility &
governance Inadequate
EIA
Inadequate SIA +
+ +
-
+ + -
-
+ + -
B3
B1
B3'
B2
Procurement Preparation Bid documents Request for proposal (RFP) Absence of
E&S criteria
Socio-ecological system integrity
failure
Inadequate bid evaluation
criteria Little incentives
for innovation
Lack of incentives to
use energy efficient systems
+ + -
+
+
- - +
+
-
+ B5
B6
Procurement
& evaluation (P&E) team
Lack of encouragement
for innovative solution Lack of skill &
knowledge of sustainability in
P&E team
+
- +
+
-
B4
Model concession
agreement (MCA)
Outdated norms for future risks
Inadequate precautionary
& adoption measures Rigid MCA
for risk allocation
Complaints on higher user charges
Intra-generational inequality &lack
of livelihood sufficiency
Inaccessible infrastructure
services +
-
+
+
-
-
+
+
-
B7
B8
Bidding Contract Finalization
+ +
Bid/RFP distribution More professional services & lengthy
negotiations
High bidding
& transaction cost
+ - +
+
-
Socio-ecological civility &
governance failure
Bid evaluation
Political &
local interference
Lack of transparency &
accountability +
-
+
+
-
Contract agreement
Opposition of public sector
Goal conflicts between private
& public sector +
- +
+
- B9
B10
B11
Intra-generational inequity and lack of livelihood sufficiency in user charges, and bidding and transaction cost:
Public sector has established a regulatory mechanism to implement effective user’s charges for infrastructure services but the users have complained against PPP projects on account of its higher tariff charges. This prevents accomplishment of ‘intra-generational equality’ and ‘livelihood sufficiency’ principles of sustainability. The higher user charges will make the service unaffordable and prevent access to infrastructure services to the poorer section of the society. The inaccessibility of infrastructure due to high user charges negatively affects the system dynamics behavior on procurement preparation (shown as balancing feedback loop B7).
The PPP procurement process has well-established bidding process but the bidding process suffers from high transaction and tendering costs due to lengthy negotiation and need for extensive professional services. This adversely affects the requirement of the principles of
‘intra-generational equality’ and ‘livelihood sufficiency’ of sustainability. The negative system dynamics behavior on bidding process has been represented in the preliminary model using the balancing feedback loop (B9).