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Business Model Choices for Government

Business Model Choices for Government. IIIT-H. Tools…. PPP. Public Private Partnership.

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Business Model Choices for Government

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  1. Business Model Choices for Government IIIT-H

  2. Tools… PPP

  3. Public Private Partnership • long-term arrangements in which the governments purchases services under a contract either directly or by subsidizing supplies to consumers …the government bears substantial risks - for example, by guaranteeing revenue or returns - on projects that sell directly to consumers World Bank

  4. Among other things, PPP is a procurement decision • As a procurement decision, PPP attempts to find answer to the question • Should Govt provide service “x” on its own in the traditional format or • should Govt. enter into a partnership with the Private Sector to fulfill its commitment

  5. Decision dimensions • Expertise • Political – [encourage Pvt Sector] • Philosophical – [reducing role of govt] • Resources – [Human] • Resources – [Time] • Resources – [Funds]

  6. Time Value of Money • How to calculate NPV? Ct NPV = ∑----------- (1+i)t • Ct = Amount of Cash flow (inflow – outflow) • i = discount rate (or rate of return that could be earned on an investment) • t = time of the cash flow (year 1, year 2…)

  7. Exercise…NPV analysis

  8. Cross-over Rate

  9. Derivation of discount rate / return on capital • Required return is the sum of the risk-free rate of interest and a compensation for bearing risk.

  10. A discount rate is therefore a composite…

  11. Value for Money • VfM is defined as “the optimum combination of the whole of life cost and quality (or fitness for purpose) of the good or service to meet the user’s requirements”. • It is linked in many ways to cost-benefit analysis. • VfM may include benefits that are not monetized (as it is not always easy to do so).

  12. Exercise…Perform Cost effectiveness analysis

  13. Cost effectiveness analysis

  14. Coordinating work effectively often turns out to be much harder than dividing it. • Partnerships are one of the coordinating devices • The choice of tools is a difficult cultural / political / Legal / economic decision. Decisions should be taken only after DETAILED analysis

  15. Govt.PROCUREMENT

  16. Decisions • Make or buy? • Two State or Three Stage process? • Request for Information • Request for Proposal • Contract • Pre-qualification • Selection criteria • L1 • Quality and cost based selection [QCBS] • SLA [Service Level Agreement]

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