Public-Private Partnership Impact Stories Lesotho: Public Health Network In 2009, Lesotho embarked upon a public private partnership (PPP) to rebuild the country’s failing network of public health facilities. In 2012, the health network pro- vided services to approximately 375,000 outpatients and 23,000 inpatients. The Tsepong Consortium, headed by Netcare together with local investors and healthcare providers were awarded the 18 year contract in February 2009. Tsepong designed, constructed, partially financed, and now operates this network of public health facilities that includes the new Queen Mamohato Memorial Hospital as well as three expanded primary health care clinics in the greater Maseru area. The project cost approximately US $100 million and is financed through a combination of com- mercial financing by the Development Bank of Southern Africa, a government capital contribution and private equity. The new health network has improved quality of care and accessibility, and provides improved working conditions, training and professional development programs for health professionals. This series provides an overview of public-private partnership stories in various infrastructure sectors, where IFC was the lead advisor. The project was supported by a grant of $6.25 million from the Global IFC Advisory Services in Partnership for Output Based Aid (GPOBA) that was used for the initial Public-Private Partnerships 2121 Pennsylvania Ave. NW delivery of primary care services throughout the health network. Washington D.C. 20433 ifc.org/ppp The Global The Partnership on Global Partnership Output-Based Aid on Output-Based Aid BACKGROUND Bidders were scored on their technical proposals and then on their Lesotho is a small, mountainous country of two million people financial bids. Fourteen companies participated in the investors’ in southern Africa. Fifty-eight percent of the population lives on conference and two submitted bids. less than $1.50 per day. The country faces serious challenges in the Tsepong Consortium, comprised of regional provider Netcare health sector: the third highest HIV prevalence rate globally, and along with local investors and operators, was selected by the infant mortality, mortality for children under five and maternal government after thorough review and negotiations in February mortality rates are amongst the lowest in the world. At the time, 2009. Construction started in March 2009, supporting clinics the nation’s only tertiary hospital was over 50 years old and opened in May 2010, and the new Queen Mamohato Memorial consumed ever-increasing government resources, while providing Hospital opened in October 2011. a declining quality of service. IFC’S ROLE The government approached IFC to help find a private sector partner to improve health facilities and services. To achieve POST-TENDER RESULTS this, IFC advised the government on the feasibility, structuring, • Increased capacity to deliver affordable and high tendering, and implementation of a public-private partnership quality health services. (PPP). It worked closely with the government to improve its understanding of PPPs, build its implementation capacity, and • Patient satisfaction increased by 22 percent. helped it to garner political support. • Per unit cost of operation (excluding tax and capi- The IFC team undertook extensive due diligence and tal cost compared to old facility) decreased by 22 commissioned a baseline study to document the existing service percent. level and condition of the facilities. This study provided the basis for future evaluation and comparison and gave potential bidders • Overall death rate decreased by 41 percent—pe- realistic operating data to use in preparing their bids. Finally, the diatric pneumonic care decreased by 65 percent, team developed the bidding documents and the PPP agreement maternal death rate decreased by 10 percent, and and supported the government through the tender process. still birth death rate decreased by 22 percent. • Increased access for 330,000 people to high quality, TRANSACTION STRUCTURE The project structure responded to the government’s objective public funded secondary and tertiary healthcare to eliminate the existing problems with the health system, while services. maintaining costs within government budget. The project will also • Chosen as one of the world’s most innovative proj- have a long-term effect on local economic development—bidders ects by KPMG in its ‘Infrastructure 100: World Cities were required to include specific targets for local participation Edition’ report. in project equity, management, subcontracting, and community development. These targets, along with stated increases over the * According to GPOBA Implementation Completion Report life of the contract, were incorporated in the final PPP agreement (ICR) published in Sep 2013 as contractual obligations. This story was originally published in 2009, and updated on 12/2013 Project performance is monitored quarterly by an independent monitor jointly appointed by the government and the private operator. In cases when required standards are not met, predetermined penalties are levied. There is also a Joint Services Committee, established by the government and the private operator, to review overall performance and to develop mechanisms, procedures, and protocols that help improve services within the health network. The winning bidder was also required to obtain and maintain accreditation from the Council for Health Services Accreditation of Southern Africa (COHSASA). The facilities were fully accredited in 2013. PROJECT COMMENCEMENT Bidders were required to submit bids within minimum volume, service, and budget parameters to provide the government with a clear idea of what was possible within the range of affordability.