DEVELOPMENT OF HOTEL

Chhattisgarh Tourism Board (CTB) is a nodal agency of the State Government with its object of Tourism Development and Hospitality in the State. CTB had appointed me as PPP Consultant and Management Consultant for its Project Management Support and to examine Bid Documents.

Chhattisgarh Tourism Board (CTB) had assigned me consultancy for a hotel project intended to be developed on a their own land, situated near national highway, on the bank of a river and 13 KM away from city of Raipur under PPP Module. Earlier hotel was there at the same place 15 years ago but now it was demolished and government intended to build a new one.

I had carried out economic feasibility study and prepared Detailed Project Report including Bid Documents for the said project. On the basis of that, I had recommended to develop a Budget Hotel with Light Convention and Recreational Facility at the proposed site because of its present location and distance from the railway station and airport.

When I was promoting the project with object to create good competition so as to receive best price for the prospective biding process, I had learned 2 lessons which was as follows:-

Case 1. - A builder with sound financial background had shown interest on the project with an object to diversify his business. He had also expressed his willingness for the welfare of some needy families residing adjacent to the hotel, through employment generation in the hotel and giving free education to their children.

Having analyzed his financial strength with the eligibility criteria of the bid document it was found that he failed to comply with the clause of eligibility criteria. As per the eligibility criteria, the bidder should have experience in the hotel business with certain turnover achieved in last 3 years. After verification of his documents, it was found that his net worth is good enough but he did not qualify the criteria of experience of similar business and hence he was failed to participate in the bid.

It was disappointing, because builder was thinking of giving better life to the needy and poor people through this business but he was not eligible to participate. I am well acquainted with the builder; he was a city based businessman and a social worker too and had good connections with some of the social organizations and spending lot of money on poor and needy people.

Lessons learned - I have learned from this case, that in case of a PPP project, manageable risk is transferred from Government to the Private Partner and hence the criteria of past experience in the similar business and certain level of turnover should not be included in the bid document. In PPP project, investment has to be made by the private partner; hence it is necessary that they should have enough net worth and capacity to get bank finance if required.

Case 2. - A Steel Trader approached me with a proposal to develop a Snow Park at the same place instead of hotel. He visited some of the places where, such park has been created, as he was interested for the project. Initially he talked to me about the possibility of changing the plan from hotel to Snow Park, so that he can participate for the same. I informed him that the Board has approved hotel project for this place, therefore changes is not permitted.

Secondly he informed that if he will submit a proposal for development of a snow park then can government will allot him a piece of land and will make PPP with him ? On the same I replied that if an unsolicited proposal of Snow Park is submitted, even government will go for the tender process and he has to fulfill the eligibility criteria. Further also made him clear that if he is willing to take the project in partnership with the government then even government will seek his previous experience in similar type of project which he do not possess.

He expressed that he have enough money to buy the land and he is sure about the success of the project because of its uniqueness, the only reason to make such project with partnership of government because he will get recognition and he want to do something for the government.

Lessons learned – I acknowledge that there are people who can trust the government and have concern to the nation. It also indicates the appropriateness of the PPP module in the process of development and increasing level of global interest in PPPs.

These two incidence indicate various lapses in PPP and other Procurement System and need to be reformed, some of them are:

i. In case of PPP project, previous experience in similar line of business should not be given in the tender document as criteria for the evaluation of the bidder. Success of any project ( including PPP project ) depend upon capacity of private partner to handle the project, his business sense and entrepreneurship, merely experience do not guarantee the success of any project.

ii. Every person has right to diversify his business. Diversification is not only required by the business man but it is necessary for the health of the economy too.

iii. In developing countries it is often seen that a person who has capacity to invest may not have previous experience of the same business because many new development are taking place.

iv. The consortium clause provided in the tender document is a good solution to meet out the eligibility criteria in case of applicant do not have experience of similar business but again this business modal has not preferred by many businessman and further there can be a possibility of dispute between the consortium parties and in such cases there is likely hood of failure of the project.

v. If bank has financed a project on the basis of Technical and Financial Viability, Marketability, Projection of the proposed project and Net Worth of the Borrower then the same should also be followed in case of PPP and other project.

vi. Unsolicited proposals can provide a source of innovative ideas hence a separate cell is required to be formed in the government who would deal such proposals, the cell should have its own policies and procedures. Every human has right to place his idea of innovation in the form of unsolicited proposal with the government and he shall be given opportunity of being recognized and be a part of development of that innovation.

vii. Set government system are some time unable to provide desirable result therefore reform in procurement system is needed according to the present scenario, the tender document should reflect positivity and transparency rather than negativity and opportunism.

viii. In developing countries there are massive need to expand infrastructure networks and improve service delivery system therefore government has to be flexible in its laws, rules and regulations in procurement system and PPP guidelines, with object to create participation of small business group in the development process which will ultimately lead to poverty reduction and capacity building.

ix. In absence of clear rules and guidelines to determine the eligibility criteria in the tender document, concerning public department creates by themselves and act spontaneously which is the main cause of corruption. On the other side some officials are afraid of not being able to meet the high parameter which may be irrelevant looking to the size and need of the contract. High criteria parameter ( if irrelevant ) fixed by the government are only allowed big business group or multinational to get the work in the developing countries and small business group have to struggle for their survival.

x. Effective Procurement Reform can only be achieved when Public Private Partnership will not only be limited to the delivery of assets or services but to be established in case of procurement of Innovative Ideas. Nothing is powerful then the idea of innovation.

REFERENCE:

1. Study material provided by Institute of Public Private Partnership (Arlington) US

2. World Bank (2007) “Public Private Partnership Units: Lessons for their designs and use in infrastructure”

3. Draft PPP policy 2011, Ministry of Finance, Government of India

4. Spackman, Michael. 2002. “Public-Private Partnerships: Lessons from the British Approach.”

5. Public Private Partnership – a new path for tourism development by Calaretu Bogdan.

6. Development and Challenges in the Hospitality and Tourism Sector by International Labour Office Geneva in 2010.

Received on 15.02.2014 Modified on 01.03.2014

Int. J. Ad. Social Sciences 2(1): Jan. –Mar., 2014; Page 73-74

Development of Hotel Project under Public Private Partnership