PPPs Help A State-Owned Leisure Corporation to Thrive

A public hospitality group harnesses ppp investment to boost revenues, taps new capital and drives business modernization through innovative public-private-partnership contracts (ppp).

Challenge

The state was under pressure to turn around its performance and safeguard the jobs of its many thousands of employees. Yet modernization would require major investment in new facilities and technology. The leaders recognized that a radical change in operating model was required—and they saw the potential of partnering with private companies to draw in the resources and expertise needed. They asked Burk to help them develop a modernization plan for a complete transformation through public-private partnerships (PPPs) programs and projects.

Discovery

A quick assessment showed that this would be a PPP effort of unusual size and complexity. Multiple PPPs would have to be specified, designed, and delivered—one for each of the corporation's many business units. What's more, these PPPs would need to be structured to take into account several non-negotiable regulatory requirements, including protection of existing jobs and pension rights, with ongoing oversight and revenue-collection roles preserved for the public sector. Working with the corporation's leaders, we began by defining a bold and specific vision of what successful modernization would look like—and how this would boost revenues.

We then set out to craft a bespoke PPP for each business unit. The service agreements we designed covered investment requirements, revenue expectations, employment contracts, regulatory obligations, and a host of other issues such as access to land and management of plant and buildings. In each case, expertise from a range of industries and functions had to be brought together in a tightly integrated solution. Alongside this effort, we redesigned the corporation’s structure to prepare for divestment of all its cash-generating activities and to strengthen its regulatory functions, which would remain in the public sector. We sequenced the implementation, staging the outsourcing of the business units over a fifteen-month period.

Impact

When the PPP investment effort was formally kicked off, there was an enthusiastic response from investors, operators, and other interested parties from around the world. Despite the complex combination of assets packaged into concessions and the indirect nature of revenue collection, the concession proposition was well understood and accepted as bankable. Moreover, the fees demanded of the concessionaires were widely accepted as representing market value. The PPP transformation is now well under way, and it's on track to bring in considerable private investment and top-performing private operators to reinvent the organization offering.