KPMG Consulting advisor in landmark PPP project

KPMG Consulting is the Transaction Advisor to the Department of Labour for its ambitious, multibillion-rand Private-Public Partnership (PPP) project, which aims to replace and upgrade its national information technology system.

In its simplest form, a PPP is a service contract between a government department and a private partner designed specifically for complex, capital-intensive projects.

The benefit of this type of partnership is that it reduces the risk of failure, as the work is delegated to private companies that have the expertise to execute the projects correctly.

Kobus Venter, partner responsible for PPP services at KPMG Consulting, says: "Having demonstrated success elsewhere in the world, PPPs are becoming an important tool in the South African government`s economic armoury."

There are two phases of a PPP project. The first phase is the transaction, or deal itself.

It starts with a feasibility study to determine the most effective solution in terms of affordability, value for money and risk transfer, for both the government and the private sector. This analysis is presented to the National Treasury, which determines whether the project is financially viable.

From here, a tender is issued whereby private sector service providers are invited to make bids for projects including houses, hospitals and schools. Once a service provider has been selected and the deal is signed, the second phase of the project begins, the physical delivery of the service, often lasting up to 25 years.

In its role as Transaction Advisor to the Department of Labour, KPMG Consulting has been assisting the department with the first phase of the project. Michael Schur, head of National Treasury PPP Unit, says: "The feasibility study conducted by KPMG Consulting represented a landmark for PPPs in SA as it is one of the first projects to proceed to the tendering phase under the new PPP regulations. KPMG Consulting has been involved with the PPP units since its inception and as a result understands the process completely."

Venter says: "We are proud to be the Transaction Advisor to the Department of Labour on this project and we hope that the other five projects we are currently working on with the National Treasury are as successful."

Venter believes the success of the feasibility study is partly due to the clear process laid down by the National Treasury regulations. "Each phase of a project follows particular guidelines and for this reason it is KPMG Consulting`s belief that any procurement run in accordance with the regulations will have every chance of success," he says.

Other projects that KPMG Consulting is currently working on include the new head office building for the Department of Education, an electronic deeds registration system for the Department of Land Affairs, a schools project for the Free State and the Working for Water project for the Western Cape.