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IJPSM
30,2 Comparative performance of
PPPs and traditional procurement
projects in Indonesia
118 Gigih Udi Atmo, Colin Duffield, Lihai Zhang and David Ian Wilson
Department of Infrastructure Engineering, The University of Melbourne,
Received 28 February 2016
Revised 27 October 2016 Melbourne, Australia
Accepted 11 December 2016

Abstract
Purpose – The purpose of this paper is to investigate the outcomes of Indonesian power projects as
representative projects of Asian emerging economies that were procured via public-private partnerships
(PPPs) and traditional public sector procurement. Power generation infrastructure delivery in emerging
economies frequently seeks private participation via PPPs as one of the key mechanisms to attract private
finance. Undertaking a comparative benchmark study of the outcomes of Indonesian power projects provides
an opportunity to explore the historic evidence as to whether PPPs deliver better outcomes than traditional
public procurement in emerging economies.
Design/methodology/approach – This paper reports on a study of the performance of 56 Indonesian
power projects procured via either PPPs or traditional procurement. First, it focusses on project time and cost
outcomes of power plant facility during construction and commissioning and then extends this comparison to
consider the operating availability of power plants during their first two years of operation.
Findings – The results indicate that PPP projects had superior time and operating availability to those
procured traditionally whereas no significant differences were identified in the cost performance between
PPPs and traditionally procured projects. These findings highlight the importance of adopting policies that
are supported by broader sources of international financiers and high quality power plant developers.
Research limitations/implications – The quality performance analyses of projects (based on equivalent
available factor indices) were limited to the power plants in the Java-Bali region where the majority of projects
are large scale power plants.
Practical implications – This study provides an empirical basis for governments of emerging economies
to select the most beneficial procurement strategy for power plant projects. It highlights the importance of
selecting experienced providers and to adopt policies that attract high quality international project financiers
and power plant developers. This includes the need to ensure the commercial viability of projects and to
seriously consider the use of cleaner power technologies.
Originality/value – This study is the first to compare the outcomes of power projects in Asian emerging
economies delivered via PPPs against those delivered by traditional public procurement that includes
consideration of the quality of the delivered product.
Keywords Asian emerging economies, Comparative performance, Power plant projects,
Procurement strategies
Paper type Research paper

1. Introduction
Power generation infrastructure delivery in emerging economies frequently seeks private
participation via public-private partnerships (PPPs) as one of the key mechanisms to attract
private finance and, thus, overcome financing gaps in government budgets (2009; Eberhard
and Gratwick, 2011). The Asian Development Bank projected that coal will continue to have
a large share of the energy mix in the Asian and Pacific regions. The consumption of coal is
projected to increase by 81 per cent between 2010 and 2035 (Asian Development Bank, 2013)
and this concerns many commercial finance institutions who seek policies that drive
International Journal of Public
Sector Management The authors would like to thank the Ministry of Energy and Mineral Resources of Indonesia for
Vol. 30 No. 2, 2017
pp. 118-136 providing access to the project data used in this study. Thanks are also expressed to the Indonesian
© Emerald Publishing Limited Ministry of Energy and Mineral Resources of Indonesia and the University of Melbourne for their
0951-3558
DOI 10.1108/IJPSM-02-2016-0047 financial support.
reductions in carbon emissions (Williams, 2013). Conditions imposed as a part of international PPPs and
financing structures have led to increased support for power projects that utilise renewable traditional
technologies. These international project finance policies may have different impacts procurement
depending on how the power stations are procured. It is, therefore, important to compare
outcomes of power projects in Asian emerging economies via PPPs vs those delivered by projects
traditional public procurement.
This study investigates power projects in Indonesia as representative projects of Asian 119
emerging economies. The Indonesian power project situation is insightful as since 2000 the
government has procured numerous new facilities via both PPPs and traditional public
delivery. Undertaking a comparative benchmark study of the outcomes of Indonesian power
projects provides an opportunity to explore the historic evidence as to whether PPPs deliver
better outcomes than traditional public procurement in emerging economies. Such a
comparative analysis offers the potential to greatly benefit decision makers as they consider
appropriate delivery strategies for future power projects, either procured using PPPs or a
traditional public procurement method.
This benchmarking study considered time, cost, and quality performance. For project
time and cost performance, the period of investigation was from when private contractual
commitments were made until the actual completion of construction and commissioning.
Project cost performance was measured based on public sector budgets and costs for the
different procurement strategies. The cost comparison took no account of the financial
return to the private sector. For example, the risk allocation within a lump sum traditional
Engineering, Procurement and Construction (EPC) contract may insulate the public sector
from financial consequences of construction cost overruns. Should a contractor experience
construction internal cost overruns these would not influence the outcome of the cost
performance analysis based on the signed contracts. The study includes comparison of
power plant availability during the first two years of operation and this outcome is used as
an indicative measure of project quality performance. Availability of adequate power
supplies is paramount to sustain the rapid economic growth in emerging economies where
electricity demand is high.
The paper is structured such that it outlines the context of infrastructure delivery in
emerging economies and considers previous international benchmarking studies of the
performance between PPPs and traditional power projects. It then goes on to outline the
research method adopted for comparing the performance of power projects in Indonesia and
presents the results of a comparative analysis of power plants procured via either PPPs or
traditional procurement. The paper then discusses the findings and draws a number of
conclusions and their relevant policy implications.

1.1 Power plant development programme in Indonesia

Indonesia adopts a single buyer electricity market where it allows for the government to
invite private sector participation in generating electricity as independent power producers
(IPPs). It does this as a mechanism to: seeking external finance, internationalise practices
and choice of technology, and seek to develop a deeper internal market for project financing.
A power purchase agreement (PPA) governs the contractual relationships between the
public and private sector in IPPs that typically assigns the private party to finance, design,
construct, and operate a power plant facility in return for performance-based payments
from the public sector party over a long-term concession period. This PPA structure is
consistent with the general principles of PPPs. Accordingly, IPPs in a single buyer market
models have been classified as PPP power generation projects (Conrad et al., 2008).
Indonesia is in the process of planning and delivering new electrical generation projects
totalling some US$97 billion from 2015 to 2024 where private power generation will
constitute more than 60 per cent of the investment (Perusahaan Listrik Negara, 2014).
IJPSM The remaining percentage of the investment will be procured through traditionally procured
30,2 public procurement where the government uses combined public finance and bilateral loan
facilities to finance construction and commissioning of power plant facilities. The delivery of
power plant projects is dominated by the use of PPPs and traditional public procurement
like the EPC contracts and thus the question is frequently raised as to which procurement
approach delivers the greatest value.
120 International project investors from the developed economies have participated in
Indonesian PPP power projects since the late 1990s (Wells and Ahmad, 2007). Interestingly,
project developers and financiers from regional economies, especially China and India have
increased their participation in offshore infrastructure projects while many other
international infrastructure investors have concentrated on their own domestic markets
(Hazard et al., 2009; Inderst and Stewart, 2014; McDonald et al., 2009). The changing
landscape of financial markets warrants closer investigation to evaluate the availability of
sponsors and finance for power projects and the consequence of these changes on delivery
and operational performance.

1.2 International benchmarking studies on project procurement

Whilst there is a significant body of knowledge of PPP transactions for the provision of
power infrastructure in emerging economies (Chan et al., 2010; Gratwick and Eberhard,
2008; Woodhouse, 2006), this literature fails to take into account whether PPPs provide
better outcomes than the alternative traditional public procurement for infrastructure
projects in emerging economies. Frequently, it is simply assumed that PPPs are appropriate
because the financing mechanism within a PPP addresses the immediacy of constrained
government budgets. For instance, studies on critical success factors in PPPs have focussed
on the commercial transaction but there have only been limited discussions on project
performance (even if limited to the construction and operation phase) (Lam et al., 2011;
Qiao et al., 2002; Zhang, 2005). These previous studies into PPPs in emerging economies
emphasise asset-based solutions rather than service-based outcomes. This is in contrast to
countries that have sophisticated PPP experiences like Australia which use output-based
specifications that drive the public sector to focus on service delivery (Duffield, 2010; Javed
et al., 2013). This difference begs the question whether the benchmarking findings from
studies in industrialised countries are applicable for emerging economies, particularly when
the access to finance and experienced project developers for a project is also so different.
There have been few studies which compared the performance of PPP and traditional
procurement. Raisbeck et al. (2010) studied time and cost outcomes from PPPs and traditional
public procurement projects in Australia. They found that cost performance in PPPs was
better for traditional procurement projects while there was no significant difference of
timelines of project completion between the two procurement methods. A benchmarking
study in the UK suggested that PPPs had better time and cost performance (MacDonald,
2002). By contrast, Blanc-Brude et al. (2006) discovered cost escalation of over 24 per cent in
PPPs when they studied 227 road projects in Europe. Table I summarises the key findings
of these previous benchmark studies. It is evident that these benchmarking studies of
performance between PPPs and traditional projects focussed mainly on ex ante project
operation stage and included consideration of social, transport, water, and IT projects.
The number of sample of projects in these previous studies varied from 1 to 227 projects.
Whilst the benchmarking study of Raisbeck et al. (2010) may be the most comprehensive
benchmarking study to date, the data were based on an aggregate sample of projects across
various sectors. This approach has been questioned by Cheung and Chan (2011) who argue
that project complexity varies between sectors like water, transport, and power and that
these need to be separately considered. Although whole-of-life consideration between
construction and operation becomes an important feature to attain value for money in PPPs
(Grimsey and Lewis, 2005), few studies have considered project operating performance. PPPs and
Bougrain (2012) investigated energy saving in a PPP building project in France during its traditional
first four years of operation but the study did not compare the cost saving outcomes against procurement
traditional procurement.
It is concluded that the rapid economic development in Asia necessitates a significant projects
injection of finance to keep pace with the expanding provision of economic infrastructure
including power plants. Some funds are available via governmental budgets yet finance is 121
still sought from international and domestic project finance markets and one attractive
mechanism is to source finance via a PPP. Because of the unique nature of projects in
emerging economies, testing of the value gained from alternate procurement strategies such
as PPPs and traditional public procurement is required. Further, benchmarking project
performance between PPPs and traditional public procurement should be comprehensive,
be sector-specific and incorporate the performance of projects both ex ante and ex post
operation if the most appropriate procurement strategy is to be selected.

2. Methods
The proposed approach is to undertake a detailed comparison of the development, delivery,
and operation of power projects in Indonesia against the performance criteria of time, cost,
and quality.

2.1 Data sources of Indonesian power projects

The power plant projects used in this study are located on the three economic corridors of
development in Indonesia, namely, the Western part of Indonesia, Java and Bali, and the
Eastern part of Indonesia. These three economic corridors were defined in the Master Plan
for Acceleration and Expansion of Indonesia (Coordinating Ministry of Economic Affairs of
Indonesia, 2011). The projects contain project time and cost performance of 56 power
projects that have been procured through PPPs and traditional public procurement across
all Indonesia, see Tables II and III. The set of 28 PPP project have been matched against
28 comparable traditionally procured projects using the selection criteria detailed below.
Detailed metrics on quality were only available for projects procured in Java and thus a
subset of Java-Bali region projects was taken from the 56 projects in the sample resulting in
13 PPPs and 12 traditionally procured projects being used for the benchmarking of quality.
The Java-Bali region is the most developed region in Indonesia and its electricity supply
supports the largest industrial demands in Indonesia. For example, Java-Bali accounted for
75 per cent of the total country electricity sales in 2014 while the rest of the Indonesian
archipelago shared the remaining 25 per cent of the total sales (Perusahaan Listrik Negara,
2014). The Java-Bali power projects analysed in this research were located in four provinces,
namely: West Java, Central Java, East Java, and Banten.

Project
Number of measurement Project study
Study Sectors project data metrics timeframe

MacDonald Building and civil engineering 50 Time and cost Ex ante commercial
(2002) sector operation
Blanc-Brude Road sector 227 Cost Ex ante commercial Table I.
et al. (2006) operation A summary of
Raisbeck et al. Transport, water, IT, and social 54 Time and cost Ex ante commercial benchmarking studies
(2010) infrastructure operation of PPPs and
Bougrain Energy 1 Operation cost Commercial traditional
(2012) efficiency operation procurement
IJPSM
No. Project ID (i) Location (province) Fuel type Total installed capacity (MW) P time P cost
30,2 PPP PPP

1. Project P.1 West Java GFPP 84 1.00 1.00

2. Project P.2 West Java GFPP 50 1.00 1.00
3. Project P.3 West Java GTPP 90 0.98 1.00
4. Project P.4 West Java GTPP 110 0.99 1.00
5. Project P.5 West Java GTPP 63 1.04 1.00
122 6. Project P.6 West Java CFPP 660 1.37 1.00
7. Project P.7 Central Java CFPP 1,320 1.03 1.00
8. Project P.8 Central Java CFPP 562 1.48 1.00
9. Project P.9 East Java CFPP 800 0.98 1.00
10. Project P.10 East Java CFPP 1,230 1.31 1.00
11. Project P.11 North Sumatera HPP 180 1.08 1.00
12. Project P.12 South Sumatera GFPP 150 1.07 1.00
13. Project P.13 South Sumatera GFPP 80 1.14 1.00
14. Project P.14 Riau Islands CFPP 14 1.58 1.17
15. Project P.15 Riau CFPP 12 3.14 1.16
16. Project P.16 Riau GFPP 12 3.31 1.16
17. Project P.17 Lampung CFPP 13 1.85 1.21
18. Project P.18 Lampung CFPP 14 1.24 1.13
19. Project P.19 East Kalimantan CFPP 14 2.70 1.08
20. Project P.20 East Kalimantan GFPP 82 1.07 1.00
21. Project P.21 Central Kalimantan CFPP 12 3.44 1.16
22. Project P.22 West Kalimantan GFPP 65 1.66 1.10
23. Project P.23 West Kalimantan CFPP 54 2.27 1.22
24. Project P.24 South Sulawesi GFPP 60 1.28 1.00
25. Project P.25 South Sulawesi GFPP 60 1.18 1.00
26. Project P.26 South Sulawesi CFPP 200 1.59 1.11
Table II.
Project data and 27. Project P.27 North Sulawesi CFPP 110 1.22 1.00
performance of 28. Project P.28 North Sulawesi GTPP 20 1.01 1.00
Indonesian PPP Notes: CFPP, coal-fired power plant; GFPP, gas-fired power plant; GTPP, geothermal power plant;
power projects HPP, hydro power plant

2.2 Project selection criteria

Careful selection of the project sample set is important to avoid bias in choosing projects
that have been known for their successful or underperforming outcomes (Raisbeck et al.,
2010). For this study, the selection criteria of the benchmarking study from Raisbeck et al.
(2010) were adapted to select representative sample projects from the pools of the PPP and
traditional power projects. Specifically, this study focusses on the period between
contractual commitment and actual project completion of construction and commissioning
in order to measure project time and cost performance.
2.2.1 Criterion 1: power projects completed construction phase since 2000. It is considered
sensible to choose projects for both PPP and traditional power projects that have been
completed since 2000 when the country’s economy had gradually recovered from the
financial crisis that occurred in 1997.
2.2.2 Criterion 2: projects that are in operation. This study only considers power plant
projects that involved major construction and are currently operational and providing
electric supplies. The project data were gathered on Indonesian projects for the period
between 2000 and 2014. During this period the PPP projects adopted a variety of
technologies while the traditional project delivery involved the so called “the first 10,000
power development program” which focussed on the development of coal-fired power
plants. In the traditional projects studied, the Indonesian Government raised a large
proportion of finance from China in return for adopting coal-fired power products and
services. All these projects utilised a conventional subcritical coal-fired technology.
 PPPs and
No. Project ID (i) Location (Province) Fuel type Total installed capacity (MW) P time P cost
Trad Trad
traditional
1. Project T.1 West Java CFPP 625 1.54 1.00 procurement
2. Project T.2 Banten CFPP 600 1.09 1.00
3. Project T.3 Banten CFPP 945 1.60 1.00
projects
4. Project T.4 West Java CFPP 990 1.50 1.06
5. Project T.5 West Java CFPP 1,050 2.14 1.00
6. Project T.6 Central Java CFPP 630 1.79 1.06 123
7. Project T.7 Central Java CFPP 660 1.87 1.00
8. Project T.8 East Java CFPP 630 2.15 1.00
9. Project T.9 East Java CFPP 660 1.75 1.09
10. Project T.10 East Java CFPP 700 2.12 1.02
11. Project T.11 Aceh CFPP 220 1.46 1.00
12. Project T.12 North Sumatera CFPP 440 2.18 1.00
13. Project T.13 West Sumatera CFPP 224 1.75 1.00
14. Project T.14 Riau CFPP 200 1.18 1.00
15. Project T.15 Bangka Belitung CFPP 60 2.06 1.00
16. Project T.16 Bangka Belitung CFPP 33 2.31 1.00
17. Project T.17 Lampung CFPP 220 2.21 1.00
18. Project T.18 West Kalimantan CFPP 100 1.56 1.00
19. Project T.19 West Kalimantan CFPP 55 1.30 1.00
20. Project T.20 East Kalimantan CFPP 220 1.34 1.00
21. Project T.21 Central Kalimantan CFPP 120 1.31 1.00
22. Project T.22 South Kalimantan CFPP 130 2.00 1.18
23. Project T.23 South Sulawesi CFPP 100 1.94 1.18
24. Project T.24 South Sulawesi CFPP 50 2.38 1.14 Table III.
25. Project T.25 Gorontalo CFPP 55 2.89 1.00 Project data and
26. Project T.26 Nusa Tenggara Barat CFPP 50 1.71 1.42 performance of
27. Project T.27 Maluku CFPP 30 1.67 1.00 Indonesian traditional
28. Project T.28 Ende CFPP 14 2.53 1.37 power projects

2.2.3 Criterion 3: project capital size is larger than US$20 million. Projects were gathered
from the project pools with minimum size of capital expenditure equal to US$20 million.
2.2.4 Criterion 4: similar number of PPP projects to traditional projects in each pool.
In total, 28 PPP projects were available for evaluation and these projects were matched with
a sample of 28 traditional projects that have a similar level of complexity and scale.
2.2.5 Criterion 5: projects of similar technical complexity. This study classifies the level of
project complexities based on the power generation technologies and power capacity sizes.
Technical complexity refers to the use of modern power stations that incorporate
mechanisms to achieve maximum energy to fuel ratios. It focusses on thermal-based power
plants with minimum power capacity of 12 MW. Project size is classified into four
categories: small size (less than 50 MW); medium (between 50 and 500 MW); and large
(above 500 MW).
Permission was granted by the Ministry of Energy and Mineral Resources of Indonesia
to summarise project information regarding Indonesian power development projects
consisting of PPPs and traditional procurement projects. Public information was available
regarding project timing and commercial documents were reviewed to glean unitised data
for project development costs and construction cost overruns. These commercial documents
included PPAs of PPPs and construction contracts for traditional projects. Specific
identifiers have been removed from the projects for confidentiality reasons. Clearance was
also obtained from the Java-Bali Dispatch Centre to collect and review information
regarding quality performance analysis of power plants.
IJPSM 2.3 Project efficiency measures: project outcome metrics
30,2 The relative performance of PPPs and traditional procurement were measured against three
key project performance measures of time, cost, and quality. The detailed performance
metrics are discussed as follows.
2.3.1 Project time performance. Project time performance was measured using two
critical project milestones, construction and commissioning dates as benchmarks.
124 Construction time performance was evaluated based on the period between the date the
contract was approved and the completion of the project. For traditional procurement
contract approval this was interpreted as the time the contract was signed between the
Indonesian Government and the main contractor of the EPC contract. For PPPs approval
time was when the public and private parties signed off the PPA.
The metric for measuring project time performance in PPPs and traditional power
projects is expressed in the following equation:

T ACðproc;iÞ T CSðproc;iÞ
P time
proc;i ¼ (1)
T CCðproc;iÞ T CSðproc;iÞ

where P time
proc;i is the project time performance on power plant (i) and procurement method
(proc), TAC(proc, i) the actual finish date of construction and commissioning of project (i) and
procurement method (proc), TCC(proc,i) the contractual finish date of construction and
commissioning of project (i) and procurement method (proc), TCS(proc,i) the contractual start
date of project construction of project (i) and procurement method (proc), proc:
{PPP, traditional}, i the power plant identification number (ID).
2.3.2 Project cost performance. The benchmarking of cost performance was calculated
based on the impact of changes in the cost base from the estimates developed by the public
sector. It includes financial impacts on the public sector budget attributed to debt finance
and construction activities. Although a typical PPP contract assigns project finance and
facility development to the private sector, there is a possibility that the private sector may
request contract renegotiations when the actual project development costs exceed their
estimated budget. This may introduce a risk of budget uncertainty to the public sector party
in a PPP project.
In traditional public procurement, the public sector may agree on cost variations that are
submitted by the EPC contractor. Although the Indonesian Government often adopts a fixed
price lump sum contract for EPC contracts, there are situations where the contractor is entitled
to claim a variation for cost escalation. The cost performance for traditional procurement
projects was measured between the initial contract price agreed in the EPC contracts ðC 1trad Þ
and the final actual cost of the completion of project construction ðC 2trad Þ. Project cost
escalations in PPPs were measured between the original tariff agreed on the PPA ðC 1PPP Þ and
the amendment tariff of the PPA post the completion of project construction phase because of
the project cost escalations ðC 2PPP Þ. The metric for measuring project cost performance in PPPs
and traditional power projects are expressed in the following equation:

C 2ðproc;iÞ
P cost
proc;i ¼ (2)
C 1ðproc;iÞ

where P cost
proc;i is the project cost performance on power plant (i) and procurement method (proc),
C 2ðproc;iÞ the final cost of project construction and commissioning works on power plant (i) and
procurement method (proc), C 1ðproc;iÞ the contractual cost of project construction and
commissioning works on power plant (i) and procurement method (proc), proc: PPPs and
{PPP, traditional}, i the power plant ID. traditional
The results of project time and cost performance for PPPs and traditional procurement procurement
are presented in Tables II and III, respectively. It is worth noting that if the project cost
performance, refer Equation (2), results in a ratio of one this can be interpreted as the actual projects
project cost to government equals the planned cost. This does not mean the private sector
met their budget. It simply means the Indonesian Government has not had to vary its 125
original deal because the costing risk was transferred to the private sector.
2.3.3 Project quality performance. The time series data of the power plant operation
performance were used to measure the quality performance between PPP and traditional
power projects. Project quality performance uses the power plant operating availability
performance that is measured in the equivalent availability factor (EAF) for each power plant
unit. Each power plant can contain more than one unit of operation and they are treated as an
independent EAF measurement. Accordingly, one power plant project may have more than
one EAF measurement if the project contains more than one power plant unit. The EAF index
is derived from the international standard of IEEE 762-2006 which measures the percentage of
maximum electric generation available over a period of time (IEEE-SA Standards Board,
2007). The EAF index is considered to be one of the most important performance indices of the
IEEE standard number 762 (Carazas and de Souza, 2012). This measurement method has been
recognised internationally and used by many international power utilities companies and
organisations like the North American Electric Reliability Council (NERC) (North American
Electric Reliability Corporation, 2012). The following equations express the quality
performance measure that is based on the EAF index:

P quality
proc;i;m : EAFðproc;i;mÞ (3)

AG
EAF :  100 (4)
MG
where Pquality
proc;i;m is the project quality performance on power plant (i) and unit number (m) that
has been procured using procurement method (proc), EAF(proc,i,m) the EAF on power plant (i)
and unit number (m) that has been procured using procurement method (proc), AG the
available electricity generation from a power plant unit, MG the maximum electricity
generation from a power plant unit.
The power plant EAF index for the first two years of operation was selected to measure
power plant operating performance. Early years of operational life of a power plant are
essential to measure power plant performance which is influenced by commissioning process,
potential random failure, and operating procedure (de Souza et al., 2012). All of the power
projects in the Java-Bali economic region between 2000 and 2014 were selected for this study.
The Java-Bali region is connected in a single electric transmission grid that is remotely
managed by the Java-Bali Control Centre ( JCC). The JCC governs and automatically records
the performance operation of all power plants in the interconnected Java-Bali electric grid,
including the EAF index for all units of power plants. The study data consist of the EAF
indices of a total 16 power projects and contain 25 units of power plants (detailed information
on project quality performance for PPPs and traditional procurement are given in Tables II
and III). While the sources of data for time and cost outcomes were aggregated for each power
project, the EAF data were available for each unit of power plant. If a power project has more
than one power plant unit, a specific project ID was assigned. For example, Project T.2 in the
EAF data in Table II has two units of power plants. Accordingly, an EAF value for each unit
was assigned to the project ID of Project T.2.1 and Project T.2.2 (see Table IV).
IJPSM Equivalent availability factor (%)
30,2 Procurement Project ID 1st year 2nd year

PPPs Project P.1 100.00 98.20

Project P.2 100.00 98.20
Project P.3 92.50 99.70
Project P.4 98.00 97.00
126 Project P.5 92.00 98.20
Project P.6 92.41 86.25
Project P.7.1 79.67 77.30
Project P.7.2 75.25 79.70
Project P.8.1 76.03 62.57
Project P.8.2 69.85 74.70
Project P.9 97.12 89.23
Project P.10.1 94.63 86.33
Project P.10.2 94.78 93.01
Traditional procurement Project T.1 39.2 50.76
Project T.2.1 53.9 87.60
Project T.2.2 45.5 84.78
Project T.3.1 48.19 67.35
Project T.3.2 39.08 38.73
Project T.3.3 51.52 70.12
Project T.4.1 62.6 67.83
Table IV. Project T.4.2 76.1 58.97
Equivalent availability Project T.4.3 64.36 84.74
factor of PPP and Project T.6.1 74.14 68.49
traditional Java-Bali Project T.6.2 73.54 58.20
projects Project T.9 26.66 60.64

2.3.4 Statistical analysis. The groups were compared by a student t-test with a significance
level of 5 per cent to determine whether there is a significant difference between PPPs and
traditional public procurement in terms of time, costs, and performance. The data were
confirmed to approximate that of a normal distribution. Analysis of variance (ANOVA) was
also conducted to compare time and cost outcomes, respectively, between power projects in
the Java-Bali and those outside the region. IBM SPSS Statistics (version 22) was used to
perform all statistical analysis (Table V).

3. Results
The results of the comparative performance between PPPs and traditional power projects
are presented in Table VI. The time and cost findings are summarised diagrammatically

Procurement Location Two-way ANOVA

Java- Outside Factor 1: Factor 2: Interaction (factor
Outcomes Performance PPP Traditional Bali Java-Bali procurement location 1 × factor 2)

Time Average 1.54 1.83 1.44 1.82 F ¼ 5.42 F ¼ 5.81 F ¼ 2.73

SD 0.74 0.43 0.42 0.67 po 0.05 po 0.05 p ¼ 0.10
Number of
observations 28 28 20 36
Table V. Cost Average 1.053 1.054 1.01 1.08 F ¼ 0.05 F ¼ 6.71 F ¼ 0.46
Analysis of variance SD 0.08 0.11 0.03 0.11 p ¼ 0.82 po 0.05 p ¼ 0.50
of time and cost Number of
performance observations 28 28 20 36
 Quality (EAF)
PPPs and
Procurement Performance Time 1st year 2nd year traditional
strategy benchmarking performance Cost performance operation operation procurement
Traditional public Average 1.83 1.054 54.56 66.51 projects
procurement (trad) SD 0.43 0.11 15.82 14.49
Number of
observations 28 28 12 12 127
Public-private Average 1.54 1.053 89.40 87.72
partnership (PPP) SD 0.74 0.08 10.39 11.43 Table VI.
Number of Results of the
observations 28 28 13 13 performance
quality quality
Conclusions P time time
trad 4P PPP No significant cost P trad oP PPP P quality quality
trad oP PPP benchmarking
( p o0.05) differences ( p o0.05) ( po 0.05) between PPPs and
( p ¼ 0.36) traditional

in Figure 1 and then the time and cost outcomes are discussed. The quality results are
summarised in Figures 2 and 3 and then the findings on quality are discussed.
Figure 1 details the time and cost performance of PPPs and traditional power projects.
It appears from these results that projects delivered via a PPP had better time management
than traditionally procured projects. There was no apparent difference in cost performance
between the two procurement methods. A detailed comparison of project cost, time, and
quality are detailed in the following sections.

3.1 Cost performance analysis

The results of the cost performance comparison between PPP and traditional power
projects, summarised in Table VI, show no significant difference of project cost performance
between PPPs and traditional procurement. The public sector contracting agency assumed
on average 5.4 per cent of cost escalations from PPP projects although contractually the
private sector were responsible for construction cost overruns. The public sector party in
traditional public procurement had assumed on average project construction cost
escalations of 5.3 per cent over the original EPC contracts.
Based on the cost overrun ratio, the extent of cost overruns varied between 8 to
22 per cent of original contractual cost in PPP projects. The cost overruns occurred in ten
PPP power projects that were located outside the Java-Bali region (Table II). The public

Relative Time Performance

Late Completion Early Completion
2.20 2.00 1.80 1.60 1.40 1.20 1.00 0.80
0.80

1.00
Relative cost performance

1.20

1.40

1.60
Traditional Figure 1.
PPP experienced sponsors Comparison of project
1.80
PPP emerging sponsors
time and cost
performance
2.00
IJPSM PPP POWER PLANT QUALITY PERFORMANCE EAF
FACTOR
30,2 110

100

90
128 EAF INDEX 100%

80

70

Figure 2. 60
PPP power plant
quality performance
measured in the 50
1 3 5 7 9 11 13
equivalent availability
factor PROJECT NUMBER
PPP 1st Year PPP 2nd year NERC Benchmark

TRADITIONAL POWER PLANT QUALITY PERFORMANCE

EAF FACTOR
100

90

80
EAF INDEX 100%

70

60

50

40

Figure 3. 30
Traditional power
plant quality 20
performance measured 1 2 3 4 5 6 7 8 9 10 11 12
in the equivalent PROJECT NUMBER
availability factor
Traditional 1st Year Traditional 2nd year NERC

sector assumed construction cost escalations in nine traditional power projects and the
extent of cost overruns varied between 2 to 42 per cent from the original contractual cost.
This cost underperformance occurred in traditional procurement projects that were
categorised in small, medium, and large capacity sizes.

3.2 Time performance analysis

An investigation of time performance between PPPs and traditional projects has revealed
that project time completion delays frequently occur in Indonesian power projects. Time
performance results indicate that the average of time delay ratio for PPPs is significantly
lower than for traditional power projects, refer Table VI. PPPs completed the construction
and commissioning phases on average 54 per cent longer than the original contractual PPPs and
schedule. Traditional projects experienced completion delays of 83 per cent behind the traditional
original completion programme and the delays are significantly greater than for PPPs. procurement
Table II shows the ratio of time delays in PPP projects. Time delays occurred in 23 PPP
projects and these projects came from various locations, a range of project size/capacity and projects
for projects adopting different types of fuel technologies. These delays varied greatly from
1 to 231 per cent behind the original contractual schedules. The worst performing project on 129
the basis of time was a small size capacity of coal-fired power plant project located in the
Central Kalimantan province that is outside the Java-Bali economic region. It can also
be identified in Table II that five PPP projects had been completed either on time or ahead
the original contractual schedule.
All traditionally procured projects, refer Table III, experienced completion delays and
these delays ranged between 9 and 189 per cent longer than the original contractual
duration. These delays occurred regardless of a projects location, fuel type, or installed
capacity. The worst time performing project was a 55 MW coal-fired power plant project in
the Gorontalo province that is outside the Java-Bali economic region. Interestingly, none of
the traditional projects were completed either ahead or at the contractual schedules.

3.3 Quality performance analysis

Comparison of project quality performance using the EAF index has revealed that on
average PPP projects had statistically outperformed traditional projects by a significant
amount over the first two years of a project’s operation period. On average, PPPs had EAF
indices that were equal to 89.4 and 87.7 per cent of the first and second year of operations.
By contrast, traditional power plant units had an average EAF indices of 54.6 and
66.5 per cent, respectively. The average EAF indices in traditional procurement is far below
the international benchmarking from the NERC power plants that has average EAF of
84.01 per cent for fossil fuel power plants between 2007 and 2011 (North American Electric
Reliability Corporation – Generating Availability Report, 2012). In contrast, the average
EAF values on PPP power plants had outperformed the average power plant performance
in the NERC region, see Figures 2 and 3.
The analysis of power plant availability performance in Figure 2 shows that PPPs
generally had better availability performance than traditionally procured power plants.
It can be seen that nine out of 13 units of PPP power plants had EAF indices higher than the
international EAF benchmark from NERC in the first and second years of operation.
Conversely, all 12 traditionally procured power plant units had availability performance
well below the international EAF benchmark from NERC whilst only three power plant
units had made improvement of their availability performance above this benchmark in the
second year of operation.
The standard Indonesian PPP contract links a major component of the tariff payment to
achieving a performance of being available for at least 80 per cent of the time. It appears that
the PPP tariff payment has incentivised the majority of PPPs in the interconnected Java-Bali
region to meet the required operating performance (measured in EAFs). However, it was
noted from Figure 2 that there were four power plant units from two PPPs projects (Projects
P.7 and P.8) that had their EAF performance well below 80 per cent during the first two
years of operation. The average of the second year EAF indices of Projects P.7 and P.8 were
78.5 and 68.6 per cent, respectively. The contractual structure of Project P.7 is unique in
Indonesian standard form of PPA that it assigns operation and maintenance risk to the
public sector party. Project sponsors’ revenues were based on a finance lease agreement
(FLA) that was paid by the Indonesian state electric company on a monthly basis. The FLA
scheme provides a mechanism for transfer of technology and management of the power
plant operation to the public sector. However, it appears that the benefit of whole-of-life
IJPSM consideration through service integration between infrastructure development and
30,2 operation and maintenance has not been fully realised in the PPP that was reliant on the
FLA. A possible reason for this was that the PPP sponsors only had limited responsibilities
to finance, design, and construct the facility while the public sector party assumed long-term
responsibilities for operation and maintenance.
Project P.8 was the first large scale Indonesian PPP that was sponsored by a joint
130 venture of a state energy company and domestic project developer post the Asian
financial crisis in 1997. The structure of finance for this project was sourced from the
project sponsors’ equity and credit facilities from one of the export credit agencies in
Asia in return for utilisation of power plant equipment and provision of the main
EPC contractor from its respective country. Local banks had also participated in the
provision loan facilities for the project. The project experienced numerous technical
problems during the first years of operation that were reflected in its comparatively a low
operating performance.

3.4 Combined cost, time, and quality performance analysis

A footprint area method was adopted to compare performance on the basis of the combined
results of cost, time, and operating performance. This method was introduced by Gransberg
et al. (2013) to compare 18 international transport projects that were based on five
performance metrics, namely: technical, time, cost, finance, and context. They compared
footprint area of a radar diagram that was constructed based on the five performance
measures for each project. This study adapted the footprint area method to compare the
performance between PPPs and traditional procurement projects based on the four
dimensions, namely: construction cost and timelines, and the annual operating performance
over the first two years of operation. The radar diagram of power projects in the
Java-Bali region is presented as Figure 4 and details results based on the average project
time, cost, and first two years of operating performance in PPPs and traditionally procured

Radar diagram of the Java-Bali project

performance
1st year
OP(ratio)

2.0

1.0

time_ratio 2nd year

0.0 OP(ratio)

Figure 4.
Radar diagram of
project time, cost, and cost_ratio
operating performance
PPPs Traditional procurement Baseline
projects. The diagram was developed using the first years of operating performance PPPs and
(full data provided in Tables II and III) and their associate time and cost outcomes, refer traditional
Tables II and III. The EAF data were normalised to be consistent with the cost and procurement
performance measures using Equation (5). In this normalised operating performance ratio,
the higher ratio beyond unity indicates negative performance: projects
1
Op  ratioproc;i;m ¼ (5) 131
EAFproc;i;m
Opratioproc,i,m is the normalised project quality performance on power plant (i) and unit
number (m) that was procured through procurement method (proc), EAF(proc,i,m) the EAF on
power plant (i), unit number (m), and that procurement method (proc).
It is evident from Figure 4 that the PPPs projects had superior performance when
compared with the traditional projects for the other three measurement factors, namely: the
construction timelines, and the first and second years of operating performance. It also
appears that traditionally procured projects had experienced some cost overruns although
the average was relatively small, approximately 3 per cent over the original budget, this did
not occur in PPPs. This indicates that PPPs projects in the Java-Bali region have marginally
better financial capabilities and construction management techniques such that they have
higher budget flexibilities to manage construction programme. Table VII summarises
footprint area for all projects in the Java-Bali which contain a complete set of data of time,
cost and operating performance.
The average of footprint area in PPPs is 2.49 and this value is substantially lower than
that for traditional procurement (4.78). An independent t-test conducted for footing area data
in Table V confirmed that the difference of average footing area between PPPs and

Operating performance
No. Project ID Cost_ratio Time_ratio 1st year 2nd year Footing area

1. Project P.1 1.00 1.00 1.00 1.02 2.02

2. Project P.2 1.00 1.00 1.00 1.02 2.02
3. Project P.3 1.00 0.98 1.08 1.00 2.06
4. Project P.4 1.00 0.99 1.02 1.03 2.04
5. Project P.5 1.00 1.04 1.09 1.02 2.15
6. Project P.6 1.00 1.37 1.08 1.16 2.63
7. Project P.7.1 1.00 1.03 1.26 1.29 2.62
8. Project P.7.2 1.00 1.03 1.33 1.25 2.66
9. Project P.8.1 1.00 1.48 1.32 1.60 3.57
10. Project P.8.2 1.00 1.48 1.43 1.34 3.43
11. Project P.9.1 1.00 0.98 1.03 1.12 2.13
12. Project P.10.1 1.00 1.31 1.06 1.16 2.54
13. Project P.10.2 1.00 1.31 1.06 1.08 2.45
14. Project T.1 1.00 1.54 2.55 1.97 6.23
15. Project T.2.1 1.00 1.09 1.86 1.14 3.18
16. Project T.2.2 1.00 1.09 2.20 1.18 3.63
17. Project T.3.1 1.00 1.60 2.08 1.48 4.75
18. Project T.3.2 1.00 1.60 2.56 2.58 7.45
19. Project T.3.3 1.00 1.60 1.94 1.43 4.46
20. Project T.4.1 1.06 1.50 1.60 1.47 3.95
21. Project T.4.2 1.06 1.50 1.31 1.70 3.79
22. Project T.4.3 1.06 1.50 1.55 1.18 3.50 Table VII.
23. Project T.6.1 1.06 1.79 1.35 1.46 3.91 Comparison data for
24. Project T.6.2 1.06 1.79 1.36 1.72 4.24 project time, cost, and
25. Project T.9 1.09 1.75 3.75 1.65 8.22 operating performance
IJPSM traditionally procured projects was statistically significant ( p o0.05). These results show
30,2 that PPPs had an overall time, cost, and operating performance that were substantially
better than those in traditional procurement.

3.5 Analysis of the importance of project location to time and cost performance
The benchmarking performance of combined cost, time, and quality of power projects in the
132 Java-Bali economic region raises a consideration whether there was a consistency of
performance of power projects between the Java-Bali economic region and those outside the
region. A two-way ANOVA was performed to examine the effects of a procurement method
and location of a project on project performance, measured in time, and cost outcomes,
respectively (Table V). It should be mentioned that project operating performance was not
included in this analysis due to the lack of data outside the Java-Bali.
The results of two-way ANOVA on project time and cost outcomes highlight important
findings which demonstrate power projects located in the Java-Bali region had on average
better cost and time performance than those in the other regions ( p o0.05). The two-way
ANOVA also confirms that PPPs statistically had better time performance than
traditionally procured projects ( p o0.05).

4. Discussion
The results of project performance benchmarking are important findings in that they
provide empirical evidence on what can be expected from power projects procured using
PPPs or traditional public procurement in Asian emerging economies like Indonesia. These
are discussed below under the headings of: project cost performance comparison, time
performance comparison, and quality performance comparison.

4.1 Project cost and time performance

The project cost comparison of Indonesian power projects shows that there were no
statistically significant cost performance differences between PPPs and traditional
procurement. This finding differs from previous international benchmarking studies in
Australia and the UK which suggested that PPPs had significantly less cost overruns than
traditional projects (MacDonald, 2002; Raisbeck et al., 2010). Power projects in the Java-Bali
region on average had lower cost overruns than those developed outside this region
regardless of the selected procurement strategy to deliver such projects.
This study has revealed important findings that PPPs on average had significantly
better time performance than traditional procurement of Indonesian power projects. Based
on comparison of the same time period between contractual commitment and actual project
completion, it was found that the average delays on Indonesian projects were significantly
higher than benchmarking project performance in Australian projects. While project
completion in Australia was delayed between 2.3 and 2.5 per cent behind the schedules
(Raisbeck et al., 2010), the average delays in Indonesian power projects were 54 per cent for
PPPs and 85 per cent for traditional procurement projects. These highlight significant time
performance problems because such events occurred in various project sizes and locations.
The ANOVA found that project location and procurement method are statistically
significant to influence project time performance although a combination between these two
factors does not show a statistically significant interaction effect on project time outcomes.
A possible explanation for the extent of project delays relates to the capabilities of project
sponsors in PPPs. Investment in PPPs is driven by: the project financial markets appetite for
the project, based in part on the size of the capital investment, the selection of the power
plant technology and the level of experience of the project developers (Atmo et al., 2015).
They found that project sponsors of PPPs in the Java-Bali region had strong financial
capabilities and project development expertise to finance construction works and PPPs and
procure proven power plant technology. Conversely, the Electricity Indonesian Society traditional
(2010) reported that project sponsors of 17 small and medium PPPs outside the Java-Bali procurement
did not have adequate financial capacities to absorb the cost escalation in the construction
of power plant facilities, especially when there were significant cost increases in plant projects
materials and equipment.
This research found cost overruns occurred in small and medium coal-fired power 133
projects and all these projects are located outside the Java-Bali region. The medium scale
gas-fired power PPP projects in Java-Bali (Table II) are dedicated to meet the electrical
demand from an integrated industrial and business complex. The geothermal PPP projects
of the Java-Bali receive carbon credit facilities that improve commercial viability of these
projects. The international power industry has been supportive of projects that adopt
renewable and highly efficient combustion technologies and are therefore less supportive of
conventional subcritical coal-fired power plants (Atmo and Duffield, 2014; Atmo et al., 2015).
PPPs typically involve high transaction costs that come from tendering, finance
arrangements and contract administration (Dudkin and Välilä, 2005). Accordingly, the
capital size of PPP projects needs to be sufficient to attract investments from experienced
private companies and offset high transaction costs. Linking PPPs to the development of an
industrial complex or other source of revenues can also improve commercial viability of
medium scale PPP projects.
It appears that experienced power developers are mainly attracted to large scale power
projects that are mostly located in the Java-Bali region whilst domestic-led investors seek
opportunities in small and medium scale power projects. Selection of fuel type, combustion
technology, and project capital size influence the ability of a power project to attract
competent project developers.

4.2 Project quality performance comparison

A comparison of project quality performance during the first two years of the operation
stage has demonstrated that PPPs delivered significantly better operating performance than
for similar traditionally procured projects. This is the period when a power plant starts to
generate electricity and hence receive payment from the public sector partner. In other
words, payments to the private sector are directly linked to the reliability of operation of the
facility and this mechanism appears to contribute to an enhanced operating standard in
PPPs. In contrast, it was observed that traditional power projects have a relatively low level
of availability during the early years of operating the power station.
It has been revealed that a FLA model of PPP contract does not result in higher operating
performance outcomes. It appears that the benefit of whole-of-life consideration through
service integration between power plant design, construction, and operation does not
maximised in this PPP model. It is acknowledged that it is important to recognise and gain
the benefits from the availability of finance and project developers from the regional Asian
economies and domestic markets. There appears evidence to suggest that greater control is
required in PPPs sponsored by emerging developers if they are to match the operating
performance achieved in other PPPs.

5. Conclusions and policy implications

This paper compares the performance between PPPs and traditional procurement methods
for Indonesian power projects. It measures the outcomes of a project based on the
dimensions of time, cost, and quality performance. Project performance of ex ante
commercial operation date was used to compare project time and cost performance between
PPPs and traditional power projects. These two dimensions of project performance were
measured between original contractual commitment and actual completion of project
IJPSM construction and commissioning. The power plant availability performance for the first two
30,2 years ex-post commercial operation date was used to compare project quality performance
between these two procurement methods.
Based on investigation of 56 Indonesian power projects, it was found that, on average, there
was no significant cost difference between PPPs and traditional procurement projects. It has
been demonstrated via ANOVA that power projects in the Java-Bali region have better cost
134 performance than those outside the region regardless of the procurement method adopted.
This study found that Indonesian PPPs had better time performance than traditional
power projects. Although this study demonstrated that both PPPs and traditional
procurement had experienced project completion delays, traditional projects had suffered
from significantly longer delays than PPPs. Project locations that attract experienced
project sponsors have significantly enhanced time performance, e.g. the Java-Bali region
compared with less attractive locations throughout the archipelago that typically have
smaller projects.
The benchmarking performance of operational availability between PPPs and traditional
public procurement in Indonesian power projects discovered that the average availability of
PPPs was much higher than that of traditional projects. It appears that contractual
arrangement linking power plant operating performance and service payments has
motivated PPPs to operate at a higher operating standard than traditional projects. On the
other hand, the traditionally procured projects had an average operating availability
performance that was far below the Indonesian PPPs and an international benchmarking
reference for thermal-based power plants.
This study provides an empirical basis for governments of emerging economies to select
the most beneficial procurement strategy for power plant projects. It highlights the
importance of selecting experienced providers and to adopt policies that attract high quality
international project financiers and power plant developers. This includes the need to ensure
the commercial viability of projects and to seriously consider the use of cleaner power
technologies.

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Corresponding author
Gigih Udi Atmo can be contacted at: gigih.atmo@gmail.com

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