Critical Success Factors for Sustainable Public-Private Partnership (PPP) in Transition Conditions: An Empirical Study in Bosnia and Herzegovina

Abstract

In the initial stages of the adoption and institutionalization of Public-Private Partnerships (PPPs), national governments of transitional economies have accepted, developed, and organized Public-Private Partnerships with varying degrees of success. This study aims to investigate the critical success factors (CSFs) influencing the establishment of a sustainable Public-Private Partnership in transition conditions. In the first part of the paper, based on an extensive review of the literature, previous studies and relevant results in this field are presented as a background for this research. In the second part of this article, the survey used a factor analysis, which, with the application of the Principal Component Analysis and Varimax method with Kaiser normalization, has extracted four CSFs: (1) the establishment of a central PPP unit—knowledge center; (2) the establishment of a compatible legal/regulatory framework; (3) development of national PPP policies and strategies; and (4) standardization and transparency of the process. In the concluding remarks, the authors address the perspectives and methodological research constraints, examining possibilities to develop new knowledge and more efficient Public-Private Partnership implementation in the developing PPP markets of transitional economies.

1. Introduction

“The general picture is one of waves of enthusiasm for PPPs followed by some disenchantment and consolidation” [1]. Public-Private Partnerships come in waves [1] driven often by fiscal problems, the need for accelerated economic development, economic recovery, and the remediation of a large number of social and societal needs. Reconstruction of poor traffic infrastructure, revitalization of neglected facilities of social, health, and educational institutions, improvement of the quality of public service, etc., are just some of the problems that require significant financial resources. Taking over more redistributive and social functions leads to an increase in public expenditure, which then leads to a situation where the government is unable to finance growing expenditures from available funds [2]. In the context of limited budgetary capacity of the public sector, Public-Private Partnership can be an opportunity to relieve budget expenditures, deliver new public services, reconstruct existing and build new public infrastructure. Grimsey and Lewis indicate that a Public-Private Partnership “fills a space between traditionally procured government projects and full privatization” [3]. Over time, national governments have accepted, developed, and organized Public-Private Partnerships in various ways, respecting their historical and cultural context, legal framework, and economic environment [4]. Advanced Public-Private Partnerships (PPP) markets have also developed Public-Private Partnerships in areas traditionally being taken care of by public sector. As a leader in the field of Public-Private Partnerships, in the last two decades, the United Kingdom has realized more than 700 PPP deals with a capital value of around £60 billion in various areas of the development of public infrastructure and services through specially developed private financial initiative programs (PFI and PFI 2) [5]. According to the National Audit Office, in the health and social care sector, this country has implemented 127 projects with a capital value of £13 billion through various models of Public-Private Partnerships and partnership programs; the defense sector has implemented 41 projects with a capital value of £9.5 billion, 61 projects with a capital value of £7.8 billion were realised in transport, while the education sector recorded the largest number of projects—172, with a capital value of £8.6 billion [5]. In this way, dozens of schools, hospitals, sports halls, prisons, roads, energy, communal, and other public infrastructure facilities were built. The Economist states that the use of private sector resources in the construction and prisons management in the UK has brought tangible benefits [6]. The key benefits of the new public administration in UK prisons are speed—private jails are built in as little as two years, rather than the seven that they used to take when the government did the building—and also the reduction of running costs, which was mainly achieved through cost optimization, staff salaries, because staff were paid a quarter less than in the public sector, though senior management at the same time recorded an increase in salaries [6].

Effective Public-Private Partnerships include the establishment of clear PPP policies and the support of a well-designed legal, regulatory, and investment framework [7]. A large number of Anglo-Saxon countries have developed extensive partnership programs over time and, with the support of institutions, embarked on widespread development of PPPs, while other countries in Central and Northern Europe have embraced PPPs with much less enthusiasm [8]. As a result, a wide divergence in national PPP approaches can be noticed, and this provides food for thought on the relationship between the national contexts on the one hand and the implementation of Public-Private Partnership policy on the other: which nationally driven elements are vital to the (non-)development of PPPs in practice [9]?

Rockart (1982) states that critical success factors (CSFs) can be defined as “several key areas of activity in which favorable results are absolutely necessary for a manager to achieve his goals” [10]. According to Liu et al. (2014), since the evolution of PPP, a number of researchers have employed the concept of CSFs to improve the understanding and best possibilities of sustainable implementing PPP policy for infrastructure development [10,11]. Previous research shows that the national PPP development depends, among other things, on political commitment [12], fiscal conditions [8], institutional support, PPP policies, legal and regulatory framework [9], and economic investment and government support for PPP initiatives [13]. Recent research revealed a number of obstacles in the implementation of Public-Private Partnerships in developing economies, such as the shortage of government financial resources, public sector inefficiencies, huge uncertainties in contractual environment, public and private partners’ capacity deficiencies, weak political willingness, and administrative bottlenecks [14].

Taking into account the prevailing views and results of previous research, this article will try to answer the main research question: which factors have an impact on the success of establishing a sustainable Public-Private Partnership in the transition conditions of PPP development markets?

2. PPP in Bosnia and Herzegovina

This chapter considers the current point of the situation in Bosnia and Hercegovina on all the key factors for successful PPP implementation at the time of the research (i.e., what is the existing legal framework, is there PPP unit—how is it organized, are there strategies, major projects being implemented, projects that failed, projects in the pipeline, positive areas, shortcomings, etc.).

During the 90s (last decade) of the 20th century and the first decades of the 21st century, most of the Western Balkan countries were in transition from one social and political system to another. Burdened by the turbulent political ambience, unsuccessful privatisation, the changes of ownership structure, and reforms that have taken place in almost all areas of social and economic life, Bosnia and Herzegovina has failed to regenerate the devastated economy and public infrastructure, which has largely slowed the country’s economy and economic development. These aspects are reflected in the fact that Bosnia and Herzegovina today has the most expensive toll costs in the region, the worst traffic infrastructure, the most expensive administration in Europe, sluggish bureaucratic procedures and rules, high price of water and utility services, as well as devastated utility infrastructure and wild dumpsites, deteriorating schools, hospitals, prisons, and other public facilities. The tendency to meet the needs for public infrastructure and more efficient public services requires significant financial means and “know-how” resources, which can be provided by mobilising private capital resources in the form of Public-Private Partnerships.

Faced with severe fiscal constraints and growing public debt, Bosnia and Herzegovina has taken first steps to establish a legal framework for concessions and Public-Private Partnerships in 2002 by adopting the Law on Concessions at the Bosnia and Herzegovina and Entity level, and two years later (2004) the Law on Public Procurement of BiH, establishing the Public Procurement Agency of Bosnia and Herzegovina, an independent, administrative organization whose role is ensuring the proper application of this Law. The Law on Public Procurement of BiH from 2004 attempted to establish a decentralized public procurement system that clearly defines the rights, duties, responsibilities, and competences of participants in public procurement procedures, clear public procurement procedures and their control, and institutions of the public procurement system [15]. However, “numerous domestic and international reports over the years on the dramatic level of corruption in public procurement in BiH” indicated the need for a more comprehensive reform of the public procurement process in Bosnia and Herzegovina and alignment with basic principles and principles of EU legislation that will guarantee transparency, equal treatment of all bidders, non-discrimination, and more efficient public spending in public procurement procedures, which led to the adoption of the new Law on Public Procurement in 2014 [15]. The Law on Concessions at the BiH level attempted to define the modalities and conditions for the granting of concessions in Bosnia and Herzegovina. This Law established the Concession Commission of BiH, whose competence is primarily to grant concessions to domestic and foreign legal persons in the sectors that are under the jurisdiction of Bosnia and Herzegovina pursuant to the Constitution and laws of Bosnia and Herzegovina, i.e., to take over the role of the Joint Commission for Granting Concessions in the cases where concession property extends to both entities of BiH, the Republic of Srpska, and the Federation of BiH and Brčko District [16]. Although the Concession Commission of BiH has considered several major concession projects, such as the Vc highway, the hydroelectric power plant Ravna on the Drinjača river or the hydroelectric power plants Novakovići, Zapeće, and Šajin Kamen [17], this state agency with an annual budget of around one million BAM [16] has not granted a single concession since its establishment. There are several reasons for this, from predominantly political issues to the fact that the competence for granting concessions and other issues related to the area of concessions and Public-Private Partnerships have been completely taken over by the entities or cantons.

By adopting the Law on PPP, the Republic of Srpska established a legal and regulatory framework for PPP in 2009, which, due to complex and complicated procedures, was upgraded in 2019 with the adoption of the Law on Amendments to the Law on PPP, that provides a simplified and accelerated project approval process and reduces number of phases required for the implementation of the project, as well as clear and precise definitions of key terms in this area, while the initiation of the procedure, the selection of a private partner, and the conclusion of the contract will be specified in special regulations. In addition to simplifying the existing procedures, the novelties brought by this change also refer to the selection of a private partner, where in addition to the previous solution, according to which only legal persons had the right to participate, the possibility of negotiation would be now given to all natural persons [18]. So far, the Republic of Srpska has not had significant success in implementing PPPs. During 2017 and 2018, the Ministry of Internal Affairs of the Republic of Srpska attempted to implement the public safety project “Improving traffic safety by using radar installations and applying modern technologies for recording violations, transmission and processing of data regarding violations” by using the PPP model [19,20]. In accordance with the Conclusion of the Government of the Republic of Srpska No. 04/1-012-2-731/17 from 23 March 2017, this project included the procurement and integration of 180 modern radars into the system that will enable more efficient recording and automatic processing of violations. The estimated value of the project was around BAM 10 million, and envisaged that the profit from the fines will be shared with a private partner. However, after a number of initiatives to suspend the project, after public pressure and negative opinion from the Security Committee of the National Assembly of Republic of Srpska, the project was officially suspended in 2018 and the Government issued a Conclusion, stating that it is necessary to conduct an additional analysis of the feasibility study, focusing on a funding model that should fully define all benefits and risks of financing the project with their own funds or through a Public-Private Partnership [21]. In addition to the stated explanation on the suspension of the project, the fact is that the Law on Budget System of the Republic of Srpska does not recognize the possibility to share the revenues from collected fines with private companies—Article 8 of the Law on Budget System, paragraph E, states that all fines except fines determined by the acts of the Town or Municipality, belong to the budgetary revenues of the Republic of Srpska [22]—so the project was realized in 2019 according to the traditional model of public procurement from budget funds [23]. The municipality of Sokolac is one of the first local communities in the Republic of Srpska that, with the support of the European Bank for Reconstruction and Development (EBRD), launched initiatives to start and implement a Public-Private Partnership project “Biomass District Heating System with Cogeneration—Sokolac” [24]. In order to achieve sustainability of the existing district heating system and its expansion to the remaining parts of the municipality urban area and suburban neighborhoods, a feasibility study of the district heating system on biomass with cogeneration—Sokolac was prepared, and based on this study, a project of installing a biomass cogeneration plant (CHP) with electricity production capacity of 1 MW of electricity and heat capacity of 4.1 MW of was proposed [25]. It is planned that the produced electricity will be distributed to the electricity network per feed in tariff of 241.3 BAM/MWh. With 8000 operating hours annually, it will produce approximately 8000 MWh of electricity and generate revenue of BAM 1,930,000. The institutional form of the PPP model was selected for the implementation of this project. The financial analysis envisages that capital investments will be realized during a period of four years in the total amount of BAM 15.2 million. At the end of the contract period, it is planned that the entire system will become the property of the public partner. After the unsuccessful first tender, in 2018 the Municipality of Sokolac published the second public call for the selection of the most favorable bidder for the realization of this project [26]. The project is still in the negotiation phase with potential investors.

Uzunović and Karkin stated that Federation of BiH has more than BAM 9.6 billion in public capital that could be privatized or partnered up with the private sector (42% of this capital, or BAM 4 billion in energy/water/natural gas supply sectors; 21%, or BAM 2 billion, in the infrastructure sector) [27]. The Federation of BiH has not yet adopted a law on PPP, although all 10 Cantons in the Federation of BiH have adopted appropriate PPP laws in accordance with their competencies. In 2010, the Federation of BiH government, upon proposal by the Federal Ministry of Transport and Communication, adopted the Draft law on Public-Private Partnership (PPP), which is in a parliamentary procedure and is now awaiting public hearing. The PPP law in Federation of BiH has been initiated mainly with Corridor 5C projects in mind, which not only explains why the abovementioned Ministry proposed it, but also why it is politically such a difficult, but nonetheless important, law to pass [27]. One of the problems and dilemmas in the Federation of BiH is the application of law and legal insecurity of the authorities that by enforcing this law provisions of another law will be violated or not appropriately implemented, which is why they are reaching for other solutions in the case of specific projects [28]. In early 2020, the National Democratic Institute of BiH (NDI BiH) gathered the representatives of parliamentary parties from the Federation of BiH, the Chamber of Commerce of the Federation of BiH, the Government of the Federation of BiH, non-governmental organizations, and higher-education institutions to try to reach an agreement on the need to adopt the Law on Public-Private Partnership at the Federation of BiH level, which is in the parliamentary procedure for a long time by analyzing aspects of regional and cantonal PPP laws. The conclusion of this conference was that the umbrella law on PPPs at the Federation of BiH level is very important in terms of linking cantonal laws on PPPs into a single, more efficient framework for the implementation of PPP projects [29].

The Law on Public-Private Partnership of the Brčko District of Bosnia and Herzegovina was adopted in 2010; however, in this part of Bosnia and Herzegovina no significant initiatives in the field of Public-Private Partnership have been recorded. Shortly after the adoption of the Law, on 20 September 2010, the first and, so far, the only PPP agreement in Bosnia and Herzegovina was signed between the Government of Brčko District as a public partner and Fresenius Medical care Deutschaland GmbH as a private partner and investor, which was realized in 2011 [30]. Realization of the project under the Public-Private Partnership model entailed constructing and equipping the Dialysis centre of the Brčko District and providing dialysis services for 120 patients, with a total investment value of EUR 5,000,000, along with the investor’s obligation to take on 12 workers [31]. The contract, which covered a period of 15 years, indicated the improvement of dialysis health services, by providing quality and continuous dialysis service in two shifts, six days a week, according to the up-to-date standards in this field. Although the initial initiatives coming from the Brčko District indicated the possibility of expanding the PPP market, this is, to date, the only official project in Bosnia and Herzegovina implemented under the PPP model [31].

Latifović stateed that the laws on PPP in Bosnia and Herzegovina are among the shorter laws in this area, the PPP of Tuzla Canton, the PPP of Sarajevo Canton, and the PPP of Herzegovina-Neretva Canton contain 35 articles each, while the PPP of Zenica-Doboj Canton and PPP of Central Bosnia Canton have 37 articles, PPP of Una-Sana Canton has 36 articles, the PPP of the West Herzegovina Canton has 34, the PPP of the Bosnian-Podrinje Canton has 23 articles, the PPP of the Posavina Canton has 37 articles, and the PPP of the Brčko District has the smallest number of articles—only 20. The draft of the PPP of the Federation of BiH has 41 articles, and the PPP of the Republic of Srpska 26. For comparative purposes, the Law on PPP in Uruguay has 62 articles, Thailand 72 articles, Madagascar 61 articles, South Korea 64, and Slovenia 154 articles [32]. Laws on PPPs in Bosnia and Herzegovina give a wide degree of freedom for conctrating in PPP procedure, and this in turn implies a very large complexity and diversity of solutions that were used [32].

Experts believe that due to the complexity of procedures and lack of understanding of the PPP concept in Bosnia and Herzegovina, we often have a wrong choice of PPP models, poorly structured and financially unjustified PPP projects, which leads to the lack of significant results in this area. Uzunović and Karkin indicated that the public policy on PPP in Bosnia and Herzegovina is a policy failure. “There is no PPP strategy on any level in Bosnia and Herzegovina, nor is there a state-level PPP framework, while the two entities have very different PPP legislation” [27]. Amović evaluated that Bosnia and Herzegovina is currently in the first stage of Deloitte PPP Market Maturity Curve [33], which is characterized by defining public policy and legislative framework, the initiation of public policy on PPP, development of the public sector comparator, and building a marketplace, which had a following results [34]:

–

many contracts (PPP) have been cancelled;

–

many contracts are on hold;

–

contracts regarding road construction have not started yet;

–

there are no data on contracts concluded in the Cantons (Federation of BiH).

In his considerations regarding the improvement of the system of concessions and the Public-Private Partnership in Bosnia and Herzegovina, Amović outlined three steps [34]: (1) first, we must develop the legal framework according with the EU and UN practice and legislation; (2) we need to build institutional capacities capable of implementing procedures and contracts; (3) we must build a strong center of knowledge that will be a “department store” for all actors in the PPP.

In order to establish a functional framework for capacity building for Public-Private Partnership in Bosnia and Herzegovina, the Office of the Coordinator for Public Administration Reform in Bosnia and Herzegovina launched the project “Public-Private Partnership in Bosnia and Herzegovina” in 2017 and 2018 in the form of a series of panels and info-conferences. This project provided a comprehensive overview and analysis of the legislative framework for PPPs in Bosnia and Herzegovina, organized a series of trainings in all major cities with over 300 participants from the public and private sectors, and prepared two pilot PPP projects [35]. Although it can be said that there was some interest from the media, public sector representatives, and the wider community, more tangible results in the form of new PPP projects were lacking. This project helped to identify attractive sectors for the implementation of investments under the PPP model in Bosnia and Herzegovina, such as the energy sector, especially investments in the fields of energy efficiency, health services sector, basic infrastructure—especially transport infrastructure and ecology sector—solid waste management, and communal services sector.

3. Review of Previous Research in This Area

In order to gain an understanding of the results of this study based on the results from previous research, the relevant literature of the most important authors in this field is given below.

Public-Private Partnerships are a long-term contractual agreement between the public and private sectors, which, by using the resources of a private partner, offer new solutions in financing public investments.

Public-Private Partnerships have many interpretations. The World Bank defines a PPP as “a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance” [36]. The OECD defines a Public-Private Partnership as “an agreement between the government and one or more private partners (which may include the operators and financiers), according to which private partners deliver the service in such a manner that the service delivery objectives of the government are aligned with the profit objectives of private partners and where the effectiveness of the alignment depends on a sufficient transfer of risk to the private partners” [37]. Tvarnø argues that there is no universally accepted definition of PPP, hence the national definition and the national perspective of PPP development differs throughout the whole EU [13]. In order to provide solutions on how to ensure a more efficient PPP framework in Denmark, Tvarnø gives an overview of national measures supporting establishment of Public-Private Partnership (PPP) in EU member States by focusing on the solutions chosen in France, Great Britain, and Ireland. Tvarnø recommends that the Danish Government should “establish a central PPP unit, create a binding legal act on PPP including a definition of PPP, and consider to promote PPPs through economic measures as in France and Ireland” [13].

Farquharson and coauthors suggest it is very important to ensure a transparent political framework in the process of adopting a Public-Private Partnership, in order to achieve confidence between the public and the private partners [7]. Transparency of the process is an important aspect that ensures the comprehensibility of PPP policies, legal and regulatory framework, which reduces uncertainty for private partner investments. Farquharson and coauthors note that it is necessary to use standardized legal terms and approaches in order to establish a clear communication with a private partner. The same authors advise the development of investment plans that include PPP projects, because in this way a private partner can be sure that there is high-level political support for Public-Private Partnerships. Investment plans and strategies explain to a private partner how PPP projects fit in the context of regional, national, or international economic plans, and why they are very important for gaining confidence and potential flow of future projects. Farquharson and coauthors specifically emphasize that PPP projects must be realistic, measurable, and achievable, and that sending a “wish list” should be avoided when planning PPP projects. In addition, these authors evaluated that the quality assurance of the process, which includes a clear division of responsibilities, competences, and approval, is a very important factor in establishing a clear PPP process map. A large number of authors, including Farquharson and coauthors, believe that the adoption of an appropriate institutional solution can provide key support to representatives of the public and private sector in the implementation of Public-Private Partnership projects. Creating a specialized unit for the PPP public sector will send a strong and credible message to a private partner regarding the competences and seriousness of intent in the PPP process. Farquharson and coauthors suggest that the private sector is now more comfortably co-operating with public officials who have previously been involved in the process, and that we should capitalize on the experience of public officials, consultants, or others who have managed this process [7].

An increasing number of authors list the importance of institutional aspects in their papers and emphasize the role of the PPP-supporting unit. Van Den Hurk and coauthors argued that the role and activities of PPP-supporting units differ substantially across countries [38]. The central PPP unit of the United Kingdom “Partnerships UK” (PUK) was functioning as Public-Private Partnership from 2001 to 2011 in its own right following the sale to private investors of a 51% stake, the remaining 49% being retained by the public sector. Alan Milburn (Chief Secretary to the Treasury of the United Kingdom from 1998 to 1999) said that the organisation of PUK unit, on the principle of Public-Private Partnership, was motivated by the idea to provide the public sector with the key commercial skills to forge increased and better partnerships with the private sector on equal terms [39]. From 2011, “Infrastructure UK” (IUK) continued to lead the central PPP unit’s operations in the UK, and in 2016 was merged with “Major Projects Authority” (MPA) into “Infrastructure and Projects Authority” (IPA). The Public-Private Partnership in Ireland dates back to 1999. Ireland and the United Kingdom are one of the most mature PPP markets. Over the last two decades, 24 projects of total capital value of over €5 billion have been implemented [4]. O’Shea and coauthors state that the Ministry of Public Expenditure and Reform in the Review of the Capital Plan 2016–2021 identified three phases in the development of PPPs in Ireland [40]: (1) the first phase of the PPP development was focused on travel infrastructure and primary education, (2) the second phase of development was concerning social housing, (3) while the third included projects regarding higher education, health, and courts.

The OECD indicates that the dedicated PPP unit that serves as a centre of expertize also increases the confidence of potential sector partners [37]. The PPP unit can be organized in three ways: (1) the PPP unit can be located within the regular organizational structure of the Ministry of Finance (such as PPP units in Great Britain, Victoria (Australia), and South Africa); (2) the PPP unit can be established as an independent separate government agency, which cooperates with the secretariat of the Ministry of Finance, or with the specialist services of the related ministries; (3) the PPP unit may be located within a specific line ministry which has the capacity to manage Public-Private Partnership projects such as, for example, the Ministry of Infrastructure [37].

PPP agencies enjoy more freedom from the political effects [41], and represent a convenient form of institutional establishment and support for launching and managing PPP in transitional economies, given that these countries are very often governed by unstable political circumstances. Political risks are one of the biggest challenges that public and private sectors are facing in launching and managing PPP projects. Sachs, Tiong, and Wang identified six categories of political risk in 14 Asian countries through their the political risks survey [42]:

(a)

currency inconvertibility and transfer restriction;

(b)

expropriation;

(c)

breachofcontract;

(d)

political violence;

(e)

legal, regulatory, and bureaucratic risks;

(f)

non-governmental action risks.

At least three out of six political risks can be confirmed in Bosnia and Herzegovina, and the dominating risk is a political violence used by the main political actors in Bosnia and Herzegovina, which is keeping the country at the brink of tension, anxiety, and conflict, then we have legal, regulatory, and bureaucratic risks that prevent law enforcement, corruption, transparency, issuing of approval, and consent, etc., along with a group of so-called non-governmental risks that include religious fundamentalism, ethnic tensions, European Union interventions.

Sachs, Tiong, and Wang suggest that the key to the successful implementation of PPP in developing countries is stable legal and political environments with reliable governmental counterparties that allow for a fair and balanced partnership of public and private sector with realistic expectations and optimal division of risk in the PPP process [42]. Verhoest and coauthors have identified three key factors affecting the development of a Public-Private Partnership: (a) political support regarding PPPs; (b) an adequate legal and regulatory framework regarding PPPs; (c) PPP-supporting instruments that include establishment of PPP units, procedures for projects appraisal, and standardization of the process [9].

In the past two decades, the United Kingdom has achieved exceptional results in the realization of public investments through the Private Finance Initiative (PFI and PFI2) in cooperation with the private sector. In order to investigate the reasons for success, Akintoye and coauthors identified 18 potential critical success factors in construction of public infrastructure through PPP/PFI projects. The survey used a factorial analysis, which, with the application of the Principal Component Analysis and Varimax methods, extracted three key success factors [43]:

• a strong and good private consortium;
• appropriate risk allocation; and
• available financial market.

Osei-Kyei and Chan said that over the past few decades, a large number of PPP studies worldwide have been focusing on understanding the critical success factors (CSFs) that have an impact on effective implementation of Public-Private Partnerships. The authors conducted research on the basis of relevant academic journals published from 1990 until 2013 that investigated this area. The survey showed that most common critical success factors of have been identified: optimum risk allocation, a strong private consortium, transparent political support, community/public support, and a transparent public procurement. This research revealed that between 1990 and 2000 (a decade) only three publications on PPP CSFs were made, indicating the fact that the concept of Public-Private Partnership between these years was still in the infancy stage, and that only several countries had launched a few projects through this scheme to foster public infrastructure growth [10,33]. However, between 2001 and 2013, 24 papers were published on PPP CSFs, which is an indication of the growing and maturing of PPP market between these years. The authors noted that Hong Kong has the highest number of researchers that contributed to the exploration of PPP CSFs since 1990 and it is followed by their counterparts from the UK, Australia, Singapore, China, and the US, while research and publications on PPP CSFs in developing countries are at an extremely low level, which suggests that PPP is still not sufficiently investigated in these regions.

Wang and coauthors state that despite the fact that PPPs became one of the more popular methods to build public infrastructure around the world, in comparison to developed countries, most developing countries have failed to attract significant investments through Public-Private Partnerships [44]. These authors argue that “risk allocation and governance environment (e.g., the extent of public participation, the level of political stability, the quality of public services, the ability of regulations, abiding the law, and the extent of corruption) may be important factors“ [44]. Private partners believe that a greater degree of control in the public sector over the governance process (corruption control, government efficiency, quality control, and the rule of law) will reduce the negative impact of private partner risk on investment. Compared to developed countries, transition economies may have more difficulties in attracting PPP investments, as private partners have to take on a higher degree of risk, especially in developing countries with poor governance environment [44]. Most of the literature is focused on researching PPP development through risk allocation or management; however, the interaction between these two areas has been neglected, as only a few studies have addressed the relationship between these two topics. For example, in an analysis of the quality of governance of public institutions in relation to the participation of the private sector in investments in public transport infrastructure, Percoco (2014) showed that good governance is very important for optimal risk allocation, given that “better governance environment positively impacts the allocation of risk to private partners” [44,45]. This author argues “that greater participation by private parties in PPP contracts is associated with better institutions in terms of lower corruption, civil freedom, and a better regulatory framework” [45].

The OECD states that the key success elements in the establishment of PPPs are: a transparent institutional framework that is supported by relevant competent bodies, achieving value for money, transparency of the budget process, and the integrity of the public procurement process [46]. Deloitte says there are a number of factors that play a role in development of a Public-Private Partnerships, including local geography, political climate, the sophistication of capital market, the forces driving formation of partnerships, and the factors enabling their creation. Countries at earlier stages of PPP development could benefit from the opportunity to learn from trailblazers who have moved to more advanced stages of implementing the public-private partnership, taking over the experiences of the United Kingdom in the implementation of PPP projects for schools, hospitals, and defense facilities, the experiences of Australia and Ireland in the construction of transport infrastructure, and the Netherlands in PPP projects for social housing and urban regeneration. Taking into account the particularities of each PPP market separately, Deloitte says it is possible that three distinct stages of PPP maturity can be observed across the world [33]. The first stage for the adoption of PPP assumes the establishment of policy, legislative, and legal framework, and acquiring necessary experiences in implementing the smaller number of simple PPP projects that will serve to improve and develop PPP market. In the second stage of the development of PPP systems activities are focused on the establishment of a dedicated PPP unit or project management agency (Knowledge Centre), launching activities for the development of new models, expanding and strengthening the PPP marketplace, leveraging new sources of funds from capital markets, innovation, redirecting profit from PPPs to new projects. The third stage of the maturity of the PPP system is the most sophisticated and it implies that the public and private sector already have a considerable experience in this process, that so far a large number of PPP projects have been implemented, and that the focus is on the development of new innovative hybrid models that use more flexible approaches in defining the role of public and private sector. The third stage is also characterised by the use of more sophisticated risk models, greater focus on the total lifecycle of project, involving capital from pension funds, transfer of knowledge from private partners to the public sector, and organizational changes in governments that will support greater use of PPPs [33].

Although a significant number of infrastructure projects have been implemented over the years through Public-Private Partnerships, PPPs are accompanied by numerous failures and a variety of associated risks, “including financial and political risks, as well as the risk of public rejection during the life cycle of PPP projects” [47]. “The implementation of PPP projects usually suffers from legal, political, and cultural impediments” [48]. For example, the Channel Tunnel project, which has been considered as one of the main construction achievements in the 20th century, is a classic example of the inadequate risk allocation that led to the bankruptcy of the company responsible for the project in 2006 due to the heavy financial burden and high work level in its first ten years of operation [49,50]. The lack of operational capacity of the Philippine National Power Company and experience in the implementation of PPP projects led to the wrong choice of PPP model (build-operate-transfer) and unreasonable risk-sharing design, and caused problems in the Philippine Power Supply Project in 2002 [49]. As of 30 June 2019, the fastest growing and largest developing country, China, recorded an impressive number of 9036 PPP projects as per China’s PPP integrated information platform [49]. However, from July 2018 to June 2019, 915 PPP projects, or about 10% of the total, were withdrawn from the project management database maintained by the government and the social capital of China’s Ministry of Finance, which leads to the conclusion that there is a significant number of risks that may lead to failure in the implementation of PPP projects. Ke, Wang, and Chan state that risks should be allocated to the partner who is best able to manage them; the government should cover political, social, and other similar risks, while private investors should be responsible for financing, construction, and operational risks, which will be further transferred to other project partners—contractors, lenders, suppliers, and others [50]. The key success factors (CSFs) of PPPs can be classified into seven groups: (1) fair risk allocation, (2) strong private sector, (3) reasonable government control, (4) transparent and efficient procurement process, (5) economic viability of the project, (6) an adequate legal framework and a stable political environment, and (7) an available financial market [51].

Based on a detailed analysis of PPPs in the United Kingdom and British Columbia, Canada, Aziz states that it is possible to identify two general approaches used by governments in the implementation of Public-Private Partnerships [48]. The first is a finance-based approach that aims to use private funding to meet infrastructure needs. It relies on user fees and project demand to fund projects. The earliest types of PPPs were predominantly finance-based and included BOT (build-operate-transfer), BTO (build-transfer-operate), and BOO (build-own-operate) models [48]. The government’s second approach is service-based. According to this approach, the goal is to use skills, innovation, and private sector management to optimize time and cost efficiency in providing “services”. An example of such an approach are the DBFO (design-build-operate-maintain) models in the United Kingdom and British Columbia, where the goal of providing better services (e.g., transport services) has led to the development of projects mainly funded by government sources, with or without user fees, while still using private funding [48].

Although governments may have shown considerable interest in PPPs, the system experienced impediments in its implementation. Through a questionnaire survey that targeted China, the United Kingdom, and other countries, Zhang identified general barriers for PPPs, including: (1) social, political, and legal risk; (2) unfavourable economic and commercial conditions; (3) inefficient public procurement framework; (4) lack of mature financial- engineering techniques; (5) problems related to the public sector; and (6) problems related to the private sector [52].

Based on the review of available literature and presentation of the the ruling attitudes in this area, the focus of this research is to identify key factors that have an impact on establishing a sustainable Public-Private Partnership in developing PPP markets of transitional economies. Bosnia and Herzegovina is one of the countries undergoing the phase of transition, changes in ownership structure, and reform in almost all areas of social life, and in terms of political, economic, and social context it represents a basic set upon which the research is conducted using empirical survey method of the representatives of the relevant public sector institutions. This study will try to address the need to create new sustainable solutions and new knowledge that will ensure a framework for more efficient implementation of Public-Private Partnerships in countries in transition conditions.

4. Subject of Research and Hypotheses

“In some ways low-income countries can benefit more from the access to new capital and technical expertise that a PPP can bring” [14], but on the other hand in most transitional economies, the PPPs play a relatively small role in infrastructure investments, averaging between 15 and 20 percent, according to the Independent Evaluation group of the World Bank from 2014 [53]. In the poorest developing countries, the use of PPPs has been even more negligible [53]. This can be significantly contributed to the underdeveloped capacity of the public sector to prioritize, initiate, evaluate, structure, and ultimately implement the PPP projects [54]. Bosnia and Herzegovina is a transitional country where PPP initiatives were launched in the Republic of Srpska in the health sector back in 2000. Although certain activities in this area have been present for 20 years, we can say that so far there have been no significant results, which is illustrated by the fact that there is only one official PPP project in Bosnia and Herzegovina. Individual projects and cooperation between the public and private sectors in certain infrastructure projects are mainly the result of entrepreneurial initiatives of local leaders and are not recorded and formally recognized as Public-Private Partnerships. Establishing PPP in transition conditions requires the development of new capacities, new strategies, new organizational structure, and new administrative processes that will enable successful planning, launching, and realization of Public-Private Partnerships. The absence of systematic solutions in establishing Public-Private Partnerships in Bosnia and Herzegovina, as well as the lack of available literature on this particular subject, helped us as the authors to opt for investigating the critical success factors (CSFs) influencing the establishment of a sustainable Public-Private Partnerships in transition conditions. The basic research problem in this paper is an underdeveloped organizational structure of the Public-Private Partnership system in countries in transition, which prevents significant use of PPPs in transitional societies, and leads to the lack of efficiency in this process.

The subject of this study is the organization of a sustainable Public-Private Partnership, improvement of organizational structure, and more efficient implementation of the Public-Private Partnership system in developing PPP markets of transitional economies.

The main goal of this study is to identify CSFs which influence the establishment of a sustainable PPP, and which will enable more efficient management of Public-Private Partnership processes in the transition conditions of PPP markets.

Having in mind a defined problem, the subject, and the purpose of research, the following hypothesis has been established in this paper:

Hypothesis 1 (H1).

It is possible to determine influencing factors for the successful establishment of PPP in developing PPP markets of transitional economies.

5. Data and Methods

This paper was based on data processed in the research conducted on the territory of Bosnia and Herzegovina that lasted four months (January–April) in 2020. The research was conducted using an empirical method, through a survey of representatives from relevant public sector institutions, by sending a questionnaire to the institutions, by mail and electronically, via the Internet. The research was based on theoretical-empirical study and started with the presentation of previous researches and relevant results in this area. The data collected were categorized and analyzed using Statistical Package for Social Sciences (SPSS) software version 19.0. Out of several available methods for statistical data analysis, we used descriptive statistics and factor analysis.

The respondents were asked close-ended questions. The first part of the questionnaire contained general questions regarding the identification of basic information about respondents (entity, organization, number of employees). In the second part of the questionnaire, which contained seven statements, respondents expressed their perception on PPPs through the five-point Likert scale, where 1 stands for strongly disagree, and 5 strongly agree. The answers to these questions are classified in three categories: The Republic of Srpska, the Federation of BiH, and Brčko District. The third part of the questionnaire included a four-point Likert scale, which contained 25 statements, and where 0 stands for I don’t know/neutral, 1: I disagree, 2: somewhat agree, and 3: agree. Based on the answers received from the third part of the questionnaire, the critical success factors (CSFs) influencing the establishment of a sustainable Public-Private Partnership in transition conditions were extracted.

6. Research Results and Discussion

6.1. Sample Structure

As part of the research, a total of 650 questionnaires were sent to the addresses of public sector institutions in Bosnia and Herzegovina, namely: 320 questionnaires were sent to institutions in the Republic of Srpska, 276 to the Federation of BiH, and 54 questionnaires to Brčko District institutions. We received 82 answers from the Republic of Srpska, 62 answers were from the Federation of BiH, while 13 answers were received from the Brčko District—in total 157 answers from respondents/representatives of relevant public sector institutions in Bosnia and Herzegovina. Questionnaire and answer frequency with percentage frequency are shown in

Table 1. Questionnaire and answer frequency with percentage frequency.

Answer Frequency
Entity	Sent Questionnaire	Received Answer	Percentage Frequency
Republic of Srpska	320	82	26.0%
Federation of BiH	276	62	22.0%
Brčko District	54	13	24.0%
Total	650	157	24.0%

Note: author’s calculation based on Excel.

.

As shown in

Table 2. Structure of participation of organizations in relation to entities.

Organisation Entity Crosstabulation
			Entity			Total
			Republic of SRPSKA	Federation BiH	Brčko District
organisation	Local Government Unit	Count	37	17	1	55
		% of Total	23.6%	10.8%	0.6%	35.0%
	Ministry	Count	7	10	0	17
		% of Total	4.5%	6.4%	0.0%	10.8%
	State agency	Count	7	8	0	15
		% of Total	4.5%	5.1%	0,0%	9.6%
	Public company	Count	24	14	10	48
		% of Total	15.3%	8.9%	6.4%	30.6%
	Higher education institution	Count	7	11	2	20
		% of Total	4.5%	7.0%	1.3%	12.7%
	Other	Count	0	2	0	2
		% of Total	0.0%	1.3%	0.0%	1.3%
Total		Count	82	62	13	157
		% of Total	52.2%	39.5%	8.3%	100.0%

Note: author’s calculation based on SPSS 19.0.

, a total of 157 respondents participated in the survey, 52.2% from the Republic of Srpska, 39.5% from the Federation of BiH, and 8.3% respondents from Brčko District.

Most of the respondents in this survey were representatives of local authorities (35.00%), public undertakings (30.60%), faculties/higher education institutions (12.70%), ministries (10.80%), state agencies (9.60%), and others (1.30%). Regarding the number of employees (

Table 3. Structure sizes of organizations by number of employees.

n_Employees
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	up to 10 employees	12	7.6	7.6	7.6
	from 11 to 50 employees	36	22.9	22.9	30.6
	from 51 to 250 employees	82	52.2	52.2	82.8
	more than 251 employees	27	17.2	17.2	100.0
	Total	157	100.0	100.0

Note: author’s calculation based on SPSS 19.0.

), most of the institutions that participated in this survey were medium-size organizations and had between 51 and 250 employees (52.20%), 22.90% had between 11 and 50 employees, 17.20% had more than 251 employees, and the smallest number of organizations was from a group of small organizations and had up to 10 employees (7.60).

6.2. Perceptions of Private-Public Partnership

In order to determine the homogeneity/heterogeneity of respondents’ opinions, in the second part of the questionnaire, the data were divided into three groups: The Republic of Srpska, the Federation of BiH, and Brčko District. By applying the descriptive statistical analysis to the resulting sample, the arithmetic mean and the standard deviation for each statement were calculated. The obtained results are given in

Table 4. Descriptive statistics.

Report
Entity		I Am Familiar with the Concept of PPP	The Public Sector in Bosnia and Herzegovina Has No Significant Experience in Implementing PPPs	The Quality of Public Services and Infrastructure Can Be Improved through PPPs	PPP Can Be in the Function of Faster Development of Bosnia and Herzegovina	I Am Familiar with the Legal Legislation that Regulates the Field of PPP	Awareness of PPPs Is Not Sufficiently Developed in Bosnia and Herzegovina	I Am Familiar with Some Unofficial Versions of PPP
Republic of Srpska	Mean	3.65	3.85	4.01	4.06	3.73	3.83	3.72
	N	82	82	82	82	82	82	82
	Std. Dev.	1.023	0.970	1.012	1.010	1.100	0.843	1.034
Federation of BiH	Mean	3.18	3.74	3.95	4.00	3.03	3.69	3.26
	N	62	62	62	62	62	62	62
	Std. Dev.	1.248	1.100	1.108	1.101	1.241	0.951	1.227
Brčko District	Mean	3.46	3.69	3.92	3.85	3.46	3.62	3.46
	N	13	13	13	13	13	13	13
	Std. Dev.	1.127	0.947	0.954	0.987	1.050	0.650	0.660
Total	Mean	3.45	3.80	3.98	4.02	3.43	3.76	3.52
	N	157	157	157	157	157	157	157
	Std. Dev.	1.140	1.017	1.041	1.041	1.194	0.873	1.107

Note: author’s calculation based on SPSS 19.0.

.

It is possible to discover similarities and differences in the attitudes of respondents by using data analysis from Table 4.

Regarding the statement about the understanding of PPP concept, the respondents from the Republic of Srpska had the most favourable attitudes (3.65) compared to a lower arithmetic value in the Federation of BiH (3.18) and Brčko District (3.46). The Economist Intelligence Unit estimates that the Republic of Srpska has been more active in including private participation in infrastructure than the Federation of BiH, and, as a result, it has developed more significant capacities and experience [55], which leads to conclusion that they have better understanding of the PPP concept.

We can also see differences in the statement about the knowledge of legislation that regulates the Public-Private Partnerships in Bosnia and Herzegovina, where the obtained value of the arithmetic mean for the Republic of Srpska was 3.73, for the Federation of BiH 3.03, and for Brčko District 3.46. This can be explained by the fact that there are several levels of public administration in Bosnia and Herzegovina and, in accordance with this fact, the area of Public-Private Partnership and concessions is regulated by 12 laws on Public-Private Partnership and 14 concession laws, while the PPP area is not regulated by special laws at the central level of Bosnia and Herzegovina.

The majority of respondents from all three environments were aware of the fiscal constraints of public sector and development potentials that can be achieved through Public-Private Partnerships and they mostly agreed with the statements that “Bosnia and Herzegovina has no significant experience in implementing PPP”, that “the quality of public services and infrastructure can be improved through PPP”, that “PPP can facilitate faster development of Bosnia and Herzegovina”, and that “the awareness of PPP is not developed enough in Bosnia and Herzegovina”.

Higher level of disagreement among respondents was noted in relation to the views regarding awareness about some non-official versions of PPPs in Bosnia and Herzegovina, where the value of arithmetic mean in respondents from the Republic of Srpska was 3.72, compared to 3.26 in the Federation of BiH and 3.46 in Brčko District. The overview of these results points to the conclusion that more PPP initiatives in Bosnia and Herzegovina are initiated in the Republic of Srpska, while “an attempt to establish PPP in the Federation of BiH has resulted in fewer and much smaller contractual partnerships” [27]. The Public-Private Partnership initiative in the Republic of Srpska was launched in 2000 in the health sector, in the absence of a PPP law, when the Euromedic Healthcare Group signed a contract with the Health Insurance Fund of the Republic of Srpska, the Prime Minister, the Minister of Health and Social Welfare, the Minister of Foreign and Economic Affairs, and the hospital director in Banja Luka to deliver dialysis services through PPP to to patients who need dialysis [27]. From the legal standpoint, the use of external dialysis services was conducted in accordance with the laws regulating the operations of companies with limited liability, and foreign companies [55]. In an attempt to create conditions for the implementation of the PPP model, the Government of the Republic of Srpska has, through its action plan, envisaged the development of PPP guidelines, adoption of rules on content and management of PPP registry, a awareness-raising campaign and dissemination of information about PPP, as well as strengthening the capacities of the public sector and intensifying activities regarding governance of municipalities public goods [56].

At Bosnia and Herzegovina’s level, the most favorable attitudes of the respondents were expressed regarding the statement that PPP can facilitate faster development of Bosnia and Herzegovina (4.02) and that the quality of public services and infrastructure can be improved through PPP (3.98). The lowest value of the arithmetic mean was obtained for the statement related to the interest of organizations in PPP projects (3.32). The second-least accepted statement was about the understanding of PPP concept, where the value of arithmetic mean was 3.45. The most heterogeneity of responses among respondents was obtained for the claim, “My organization is interested in PPP projects”, which means that highest level of disagreement among respondents was related to this statement, since the value of the standard deviation was 1.215. The second-largest value of standard deviation was obtained for a statement regarding the understanding of the PPP concept (1.140). The lowest value of standard deviation (0.873) was obtained for the claim that the PPP awareness is not sufficiently developed in Bosnia and Herzegovina and this statement had the highest level of agreement among the respondents.

The results from this part of research show positive attitudes of the public sector and their interest in PPP, but on the other hand, they suggest certain differences in the understanding and acceptance of PPP in Bosnia and Herzegovina. In order to independently plan, initiate, and implement PPP investments, the public sector needs to reorganize its processes and improve knowledge infrastructure. By analyzing the obtained data, it can be concluded that the environment factor influenced the homogeneity/heterogeneity of the respondents’ views, which gives space to prove the validity of our commitment to extract the impact factor and the design of PPP model for countries in transition in the rest of the research.

6.3. Extracting CSFs

In order to determine the homogeneity/heterogeneity of respondents’ attitudes, by applying descriptive statistical analysis, the arithmetic mean and standard deviation for each statement in the third part of the questionnaire were calculated. The obtained results were given in

Table 5. Descriptive statistics.

Descriptive Statistics
	N	Mean	Std. Dev.
Q1 There is no adequate political support for PPP in Bosnia and Herzegovina	157	2.25	1.066
Q2 Political/parlamentary support is important in implementation of PPP	157	2.63	0. 719
Q3 Public sector does not have competent personnel for PPP	157	2.26	1.057
Q4 Clear policies and legal framework are reducing uncertainty for investors	157	2.39	1.018
Q5 Establishing regional PPP offices can improve application with PPP projects by local authorities	157	2.61	0.911
Q6 Standardization and transparency of the PPP process are important from the aspect of establishing clear procedures, responsibilities, and competencies	157	2.38	0.903
Q7 Involvement of development banks and financial institutions may have positive impact on PPP processes	157	2.61	0.806
Q8 The Republic of Srpska, Federation of BiH i Brčko District have different experiences in implementation of PPPs	157	2.21	1.209
Q9 There are no institutions for PPP support in Bosnia and Herzegovina	157	1.73	1.288
Q10 Corruption and transparency of processes are corellated	157	2.05	1.234
Q11 There are no strategies and policies on PPP in Bosnia and Herzegovina	157	1.73	1.303
Q12 Central PPP unit is a knowledge center	157	2.61	0.917
Q13 Participation of a private partner in PPP unit ensures clearer and more transparent communication between the public and private sectors	157	2.57	0.762
Q14 There is no compatible legislative PPP framework in Bosnia and Herzegovina	157	2.00	1.291
Q15 More active role of Ministry of Finance in PPP process is needed	157	2.32	0.941
Q16 Development of investment plans including PPP is increasing investors confidence	157	2.31	1.085
Q17 Corruption is a major problem for the development of PPP	157	2.53	0.924
Q18 Application of law in Bosnia and Herzegovina is not efficient	157	2.24	1.127
Q19 Procedures for initiating PPPs are not clear	157	2.66	0.789
Q20 It is necessary to organize the central PPP unit	157	2.48	0.978
Q21 New knowledge about PPP can be acquired at some faculties in Bosnia and Herzegovina	157	0.76	0.914
Q22 Bosnia and Herzegovina has no official data on PPP projects	157	1.64	1.330
Q23 There are no organized PPP training programs in Bosnia and Herzegovina	157	1.48	1.212
Q24 Role of central unit is importatnt for implementation of PPP	157	2.38	0.964
Q25 PPP strategy is important for effective implementation of PPPs	157	2.01	1.303
Valid N (listwise)	157

Note: author’s calculation based on SPSS 19.0.

.

In relation to the aforementioned statements, the highest degree of acceptance was indicated for the following statements: “procedures for launching PPPs are not clear” (2.66), “political/parliamentary support is important in the implementation of PPP” (2.63), “Central PPP Unit is the knowledge center” (2.61), “establishment of regional PPP Office can improve the application with PPP projects by local authorities” (2.61), “involvement of developing banks and financial institutions may have a positive impact on PPP processes” (2.61), “participation of the private partner in PPP unit ensures clearer and more transparent communication between the public and private sectors” (2.57), and “corruption is a major problem for development of PPP” (2.53). These data show that, regardless of different perceptions of the PPP concept, public sector representatives in both entities and the Brčko District agree that vague procedures and lack of institutional capacity are one of the main obstacles in launching PPP projects. Establishment of Central PPP Unit as knowledge center with the support of developing banks and financial institutions, such as the Mexican National Infrastructure Fund—FONADIN may have a positive impact on PPP processes. This dynamic PPP unit in Mexico, through an active financial support of national development banks, established a strong financial platform to encourage the participation of public, private, and social sectors in the development of public infrastructure through providing grants for the preliminary studies for Public-Private Partnership projects, preparing the project documentation, implementing the tender process, etc. Respondents also agreed that the establishment of regional PPP offices could help local governments to take a more active part in applying for projects that, with the support and participation of private capital, could solve major problems in these local communities that local governments are unable to fund through regular budget expenditures. In addition, respondents believed that participation of the private partner in PPP unit could ensure a clearer and more transparent communication between the public and private sector, and such a case can be found in the most successful PPP market in the UK, which designed its central PPP unit exactly on the model of Public-Private Partnership in the scale of 51% (public sector)—49% (private partner), from 2001 to 2011. Yescombe said that a key argument for the separation and semi-privatization of the center of expertise for institutional support of the public sector in the implementation of Public-Private Partnership projects in the United Kingdom is that this may make it easier to recruit staff from a private-sector background [57].

The greatest heterogeneity of responses among respondents was obtained for claims that: “Bosnia and Herzegovina has no official data on PPP projects” (1.330), “PPP strategy is important for effective implementation of PPP” (1.303), “there are no strategies and policies on PPP in Bosnia and Herzegovina” (1.303), “there is no compatible PPP legislative framework in Bosnia and Herzegovina” (1.291), and “there are no institutions in Bosnia and Herzegovina to support PPP” (1.288). These findings suggest that BiH entities, Brčko District, and cantons have completely different views and experiences in terms of advocating public policies, PPP strategies, and legislation, which shows that there is an absolute lack of compatibility in the adoption of PPP processes in this country. During 2019 the Government of Zenica-Doboj Canton announced on its official website the project “Interventional Cardiology of the Cantonal Hospital Zenica” as the first PPP project in Bosnia and Herzegovina [58], despite the fact that one PPP had already been officially implemented in Bosnia and Herzegovina, namely between the Government of Brčko District as a public partner and Fresenius Medical care Deutschaland GmbH as a private partner and investor [30], which illustrates the dramatic lack of synchronization in PPP processes in this country.

In this part of research, the statistical method of factor analysis was applied, aiming to aggregate a large number of independent variables (statements) into factors. The factor analysis consists of three main steps [59]:

–

evaluation of suitability of data for factor analysis,

–

extraction of factors, and

–

rotation and interpretation of factors.

Prior to the procedure of extracting the CSFs in the establishment of PPP in transition conditions, the first step in evaluating the suitability of data for the factor analysis included data adequacy validation. As a rule, to determine the sample size, it is necessary to use a multiplier of minimum five, which means that the number of observations in the model is at least five times greater than the number of variables [60,61]. If we take into account that in extracting the CSFs 25 observations were used in relation to 157 respondents, we may note that a presumption of the number of variables and observations was satisfied in relation 1:6.28.

The second step in the analysis included reliability assurance, whether the specified dataset was suitable for factor analysis, and for this purpose the Kaiser-Meyer-Olkin (KMO) test was used.

Table 6. Kaiser-Meyer-Olkin and Bartlett’s Test.

KMO and Bartlett’s Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.		0.891
Bartlett’s Test of Sphericity	Approx. Chi-Square	7261.446
	df	300
	Sig.	0.000

Note: author’s calculation based on SPSS 19.0.

shows that the resulting value of 0.891 significantly exceeded the recommended threshold of 0.5, thus indicating the justification for implementation of this method [62]. The realized value for Bartlett’s test also shows that all conditions were met (χ² =7261.446; df = 300; Sig. = 0.000), which means that a certain degree of correlation that exists between the variables will enable their grouping and forming of the factors.

In the next step the principal components analysis (PCA) was applied, where original variables are transformed into a smaller set of linear combinations, with all of the variance in the variables being used [59].There are two ways for the determination of the number of main factors, i.e., by using two criteria:

(1)

criteria based on characteristic values (Kaiser’s criteria), and

(2)

criteria based on slope diagram—scree plot (Figure 1) [61].

The first factor in the principal component analysis explained 60.471% of variance, the second 14.966%, the third 6.299%, and the fourth 4.983% of variance, or all together, a total of 86.719% was explained. If we take into account the fact that researchers often opt for a solution where 60% of the total variance, and sometimes even less is explained [63], we may argue that the extracted factors explain a quite high percentage of the resulting variance (

Table 7. Characteristic values, total explained variance in%, and cumulative in%.

Total Variance Explained
Component	Initial Eigenvalues			Extraction Sums of Squared Loadings			Rotation Sums of Squared Loadings
	Total	% of Variance	Cumulative %	Total	% of Variance	Cumulative %	Total	% of Variance	Cumulative %
1	15.118	60.471	60.471	15.118	60.471	60.471	7.826	31.304	31.304
2	3.742	14.966	75.437	3.742	14.966	75.437	7.252	29.007	60.310
3	1.575	6.299	81.736	1.575	6.299	81.736	4.435	17.741	78.051
4	1.246	4.983	86.719	1.246	4.983	86.719	2.167	8.668	86.719
5	0.699	2.796	89.515
6	0.614	2.456	91.971
7	0.468	1.874	93.845
8	0.251	1.003	94.848
9	0.241	0.963	95.811
10	0.208	0.833	96.644
11	0.175	0.701	97.345
12	0.106	0.422	97.768
13	0.098	0.392	98.160
14	0.081	0.324	98.484
15	0.076	0.304	98.789
16	0.061	0.244	99.033
17	0.053	0.212	99.245
18	0.045	0.178	99.423
19	0.032	0.129	99.552
20	0.029	0.118	99.670
21	0.025	0.100	99.771
22	0.022	0.088	99.858
23	0.016	0.063	99.921
24	0.013	0.050	99.972
25	0.007	0.028	100.000

Extraction Method: Principal Component Analysis. Note: Author’s calculation based on SPSS 19.0.

).

The next step of the factor analysis shows the rotated component matrix (

Table 8. Rotated component matrix.

Rotated Component Matrix a
	Component
	1	2	3	4
Q19 Procedures for initiating PPPs are not clear	0.897
Q5 Establishing regional PPP offices can improve application with PPP projects by local authorities	0.844
Q13 Participation of a private partner in PPP unit ensures clearer and more transparent communication between public and private sectors	0.844
Q7 Involvement of development banks and finantial institutions may have a positive impact on PPP processes	0.807
Q17 Corruption is a major problem for the development of PPP	0.775
Q12 Central PPP unit is a knowledge center	0.742
Q20 It is necessary to organize the central PPP unit	0.732
Q2 Political/parlamentary support is important in the implementation of PPP	0.730
Q24 Role of central unit is important for the implementation of PPP	0.724		0.503
Q15 More active role of Ministry of Finance in PPP process is needed	0.611	0.564
Q23 There are no organized PPP training programs in Bosnia and Herzegovina		0.900
Q25 PPP strategy is important for effective implementation of PPPs		0.866
Q11 There are no strategies and policies on PPP in Bosnia and Herzegovina		0.836
Q9 There are no institutions for PPP support in Bosnia and Herzegovina		0.798
Q4 Clear policies and legal framework are reducing uncertainty for investors		0.778
Q16 Development of investment plans including PPP is increasing investors’ confidence		0.774
Q21 New knowledge about PPP can be acquired at some faculties in Bosnia and Herzegovina		0.754
Q3 Public sector does not have competent personnel for PPP	0.551	0.707
Q8 The Republic of Srpska, Federation of BiH i Brčko District have different experiences in implementation of PPPs			0.867
Q18 Application of law in Bosnia and Herzegovina is not efficient			0.764
Q14 There is no compatible legislative PPP framework in Bosnia and Herzegovina			0.739
Q1 There is no adequate political support for PPP in Bosnia and Herzegovina	0.543		0.670
Q22 Bosnia and Herzegovina has no official data on PPP projects				0.837
Q10 Corruption and transparency of processes are corellated				0.699
Q6 Standardization and transparency of PPP process are important from the aspect of establishing clear procedures, responsibilities, and competencies	0.515			0.537

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. ^a Rotation converged in 9 iterations. Note: Author’s calculation based on SPSS 19.0.

), which contains factor loadings that indicate the relative importance of each item in forming a factor. It is actually the correlation coefficient between each item (variable, question) with the factor itself, where if the correlation is higher, the given item better fits the factor [64]. The main goal of rotation is to provide a simpler interpretation and explanation of factors [61]. The Varimax method was applied, which took into account only those factor weights greater than 0.5 and in comparison to other methods, we can say that this one was the most successful in achieving the principle of simple structure [63].

6.3.1. CSF 1: Establishment of Central PPP Unit—Knowledge Center

The first factor explained more than half of the variances and contained a total of ten items (Q19, Q5, Q13, Q7, Q17, Q12, Q20, Q2, Q24, Q15). The highest loading factor had the statement which specifies that procedures for launching PPP are not clear, followed by the statement that the establishment of a regional PPP office can improve the application with PPP projects by local authorities, that the participation of private partners in the PPP unit and the involvement of development banks and financial institutions can have a positive impact on PPP processes, that corruption presents a major problem, and that the central PPP unit needs to be established. These statements lead to the conclusion that in the initial stages of adopting the PPP concept, it is very important that national governments establish adequate forms of institutional solutions that will serve as support in building capacities for the management of PPP processes. Specialized units for PPPs and inclusion of external consultants in the PPP process can bring experience and knowledge to government bodies, local government units, and other stakeholders involved in the PPP processes [7]. When establishing a PPP unit, it is very important to give these units a clear and concrete mandate and to give them decision-making power, not just an advisory role [65]. The building of appropriate institutional capacities for creating, managing, and evaluating PPP is a key element in order to support effective PPPs [37]. This finding indicates a significant role that the PPP unit has in the PPP processes, from the simplification of procedures for launching PPP, shaping and implementation of PPP policies, to attracting the participation of private partners, development banks, and financial institutions. Most studies, including those conducted by group of authors Sanghi, Sundakov, and Hankinson, state the connection between the establishment of PPP units and successful PPP programs [65]. The location of the PPP unit in the government is one of the most important design features because of the significance of interagency co-ordination and political support for a its objectives, and if located in a strong ministry of finance or treasury, such as PPP units in Great Britain, Victoria (Australia), and South Africa, a PPP unit is most likely to be effective in parliamentary system of government [65]. Although it is possible to distinguish variations in the organization of the PPP unit, most authors, including Ahadzi and Bowles, agree that the PPP unit sends a clear signal to potential investors from the private sector that the government has experience, expert knowledge, authority, and capability for development and management of PPP process [66].

6.3.2. CSF 2: Development of National PPP Policies and Strategies

The development of national PPP policies and strategies is a second critical success factor in formulating sustainable PPP in transition conditions and contained a total of eight items (Q23, Q25, Q11, Q9, Q4, Q16, Q21, Q3), with a high loading factor for the statement “there are no organized training programs for PPP in Bosnia and Herzegovina”; “the PPP strategy is important for the effectiveness of the implementation of PPP”; “in Bosnia and Herzegovina there are no strategies and policies on PPP”; “in Bosnia and Herzegovina there are no institutions to support PPP”; “clear policies and legal framework reduce the uncertainty for investors”; and “development of investment plans including PPPs increases investors trust”. These findings suggest that there are no relevant public policies and an adequate strategic framework for the establishment of PPPs in Bosnia and Herzegovina, noting that they represent a very important factor in the effective adoption of the PPP concept in transition conditions. PPPs are difficult to deliver in an unstable political environment, so establishing a clear policy framework helps both the public and the private sector to understand the core for PPPs [7]. The results of this study in the aspect of the development of national PPP policies and strategies complement the research of Farquharson and coauthors, who assessed the development of investment plans as a high-level political support to indicate a potential flow of future projects, which will, within the context of national or regional economic plans, explain how future projects fit together [7]. Flinders came up with a similar conclusion, claiming that in wider literature on Public-Private Partnership the politics and political commitment are seen as key variables to maneuver successful PPP projects [12], which is particularly applicable in the context of transition countries such as Bosnia and Herzegovina, where institutions do not have the capacity to adequately manage processes without proper political support and strategies. The establishment and development of national PPP policies and strategies reduces the uncertainty of public and private sectors, increases trust, and helps the private partner understand how the public sector will implement the PPP projects [7].

6.3.3. CSF 3: Establishment of a Compatible Legal/Regulatory Framework

The third factor contained four items (Q8, Q18, Q14, and Q1) with a high loading factor, which distinguish the statement that the Republic of Srpska, Federation of BiH, and Brčko District have different experiences in implementing PPPs, that the application of law in BiH is not efficient, and that there is no compatible PPP legislative framework in Bosnia and Herzegovina. We can consider the importance of establishing a compatible legislative framework by using the Bosnia and Herzegovina example. The Economist Intelligence Unit indicated that there are laws on the national, entity, and cantonal level which regulate concessions, but which can not provide a consistent and comprehensive framework. PPP implementation is further complicated by different levels of institutional development and capacity across Bosnia and Herzegovina entities [55]. These data suggest that the compatible legislative framework harmonized at all levels is very important for functional implementation of Public-Private Partnerships, which will reassure investors, eliminate any confusion, and ensure a favorable business environment for the launch of PPP projects. Sachs, Tiong, and Wang suggest that in countries where there is no national law on PPP, incompatible regulations of local governments or ministries relating to PPP are causing different ways of implementing PPP in different places, which makes it more difficult for investors to understand the rules and regulations [42]. Thus, it is not necessary that there is a single regulatory framework (if this is not possible for various reasons) but it is crucial that the laws governing the PPP area are compatible and harmonized in the common PPP market. The results of this study complement The Public – Private Infrastructure Advisory Facility (PPIAF) research, which assesses that in the initial stages of adoption and institutionalization of the PPP concept, it is very important to establish a legislative PPP framework through PPP law [67], where authors also noted that the compatible legislative framework is one of the key factors affecting success in establishing sustainable Public-Private Partnerships in transition conditions. In analyzing Public-Private Partnerships in developing countries, previous studies highlighted the importance of the existence of laws and regulations for this process, not only because they make PPPs viable, but also because implementing authorities can rely on guidelines and orientation that they provide to procure a sustainable and steady projects pipeline [55].

6.3.4. CSF 4: Standardization and Transparency of the Process

The fourth factor contained three items (Q22, Q10, and Q6), which specify that Bosnia and Herzegovina has no official data on PPP projects, that corruption and transparency of PPP process are in correlation, and that standardization and transparency of PPP process are important from the aspect of establishing clear procedures, responsibilities, and competencies. This factor has also been identified in the results of previous studies. PPIAF states that as a first step of establishing the PPP concept, national governments should pay special attention to adopting clear procedures and defining responsibility for the development and implementation of PPP [67]. Companies from the private sector would like to know what is involved in the bid process; how competitive, workable, and transparent it will be; how long will it take; in the long term, how the public authority will manage the partnership; what will be the impact of sector regulations, if any, on their contract; how the contract work will be supervised; and, most importantly, how committed the government is to the project [7]. The greater the transparency, the more efficient the partnership will be [7] and corruption will be less. In the assessment of the Public-Private Partnership environment in Eastern Europe, the Economist Intelligence Unit indicates that despite a more favorable environment at entity level, institutional responsibilities in Bosnia and Herzegovina are not sufficiently defined, and the line ministries and commissions which are involved in project planning and oversight do not have enough technical expertise regarding project financing, risk evaluation, and contract design [27,55]. In the Republic of Srpska, there is no official department, nor there are employees with job descriptions which focus on PPP alone, even though the Public Investment Department, which works within the Ministry of Finance, oversees all PPP projects [27]. The PPP Law in the Republic of Srpska envisions evaluation and monitoring of PPPs, however, starting from 2001 when the dialysis PPP started, the State Auditor of the Republic of Srpska has never conducted an official audit, and none of the monitoring reports were made available to the public [27]. In terms of standardization and transparency of processes, the situation in the Federation of BiH is even more confusing. The draft Law in the Federation of BiH does not oblige the Federal Auditor to audit the partnerships and, almost unbelievably, calls for the private partner to pay a commission fee to the Commission for this service [27]. Standardization and transparency of processes are components that reassure investors’ security and remove confusion, so it can be concluded that this factor has a great impact in creating a favorable business environment for initiation and realization of PPP projects. Sanghi, Sundakov, and Hankinson indicated that the lack of political commitment to advancing the PPP program or lack of transparency and coordination within government agencies will reduce the chances for success for the PPP unit [65], but also influence the effectiveness of the overall Public-Private Partnership process.

7. Reliability and Validity of Survey Results (Cronbach’s Alpha)

After the process of extracting factors, the validity and reliability of the survey data were statistically determined using Cronbach’s alpha. Nunnally states that the values for Cronbach’s alpha model range between 0 and 1, where an alpha value greater that 0.70 is considered acceptable, signifying good internal consistency and reliability of the data set [68]. The validity and reliability of data for four success factors are given in

Table 9. Cronbach’s Alpha reliability for the first factor success.

Reliability Statistics
Cronbach’s Alpha	Cronbach’s Alpha Based on Standardized Items	N of Items
0.969	0.970	10

Note: author’s calculation based on SPSS 19.0.

,

Table 10. Cronbach’s Alpha reliability for the second factor success.

Reliability Statistics
Cronbach’s Alpha	Cronbach’s Alpha Based on Standardized Items	N of Items
0.956	0.955	8

Note: author’s calculation based on SPSS 19.0.

,

Table 11. Cronbach’s Alpha reliability for the third factor success.

Reliability Statistics
Cronbach’s Alpha	Cronbach’s Alpha Based on Standardized Items	N of Items
0.922	0.920	4

Note: author’s calculation based on SPSS 19.0.

and

Table 12. Cronbach’s Alpha reliability for the fourth factor success.

Eliability Statistics
Cronbach’s Alpha	Cronbach’s Alpha Based on Standardized Items	N of Items
0.739	0.752	3

Note: author’s calculation based on SPSS 19.0.

.

Data analysis for the first three success factors (1 = 0.969, 2 = 0.956, 3 = 0.922) using Cronbach’s alpha indicates an excellent internal consistency, while the fourth factor (4 = 0.739), according to Cronbach’s alpha, is within the acceptable range [69], which leads to the conclusion that the survey is a relevant and reliable research instrument for measuring the attitudes and opinions of respondents.

8. Conclusions

Based on the problems and subjects of research, this article set two main goals: (1) to identify CSFs influencing the success of establishing the PPP in developing PPP markets of transitional economies, and (2) on the basis of those CSFs, enabling more efficient management of Public-Private Partnership processes in the transitional economies. These goals were very challenging, since PPP has been in use for less than two decades in developing PPP markets, a common definition of PPP still has not been established, and the adopted legislation has numerous gaps.

The determination to explore the CSFs for the establishment of PPPs in transition conditions implies the acceptance of the fact that transition is a dynamic historical process that imposes changes on almost all elements of society [70]. Transition implies establishing an institutional and legal framework to secure property rights, the rule of law, and transparent market-entry regulations [70]. The research was conducted on the example of Bosnia and Herzegovina, a transition country with a specific state organization, which due to the complexity of its units (entities and cantons) cannot act, or, in the classical sense of the word, be defined as a single entity or a republic. It is also a multiethnic, multicultural and multiconfessional state. Due to the stated specifics, the research was conducted in its two entities and the Brčko District. The transition conditions in which this research was conducted enabled the comparison of the obtained results with other transition countries that have a similar, less complex, and simpler organization system. Therefore, we can suggest that CSFs can be applied in other transition countries as well, not just in Bosnia and Herzegovina.

An effective Public-Private Partnership (PPP) framework in emerging markets can help to ensure a strong private sector response [7]. The results of this study show that the biggest obstacles to effective PPP implementation in transition countries, with a lack of professionally qualified staff, are the lack of institutional capacity for PPP, inefficient legislative framework, lack of public PPP policies and strategies, and unclear PPP initiation procedures. The research confirmed the established hypothesis and revealed the extraction of four critical success factors (CSFs) in establishing a sustainable PPP in transition conditions (Figure 2):

–

establishment of a central PPP unit—knowledge center;

–

establishing a compatible legal/regulatory framework;

–

development of national PPP policies and strategies;

–

standardization and transparency of the process.

The results of this study will provide new scientific information for the public sector, scientific and business community about the factors influencing the success of establishing Public-Private Partnerships in transition countries, as well as full clarification of the role and obligations of main actors in this area. This article has an additional importance because it can be used as a guide to initiate amendments to the legal framework for developing countries in order to build a more effective PPP system. Bosnia and Herzegovina, like many transition countries in the region, has just opened its door to PPP arrangements. The legal and institutional framework is not satisfactory, and it is not accompanied by the necessary reforms of the public sector and judiciary. With such a starting position, good results cannot be expected. The identification of four critical success factors (CSFs) can contribute towards the creation or design of a sustainable PPP model in transition conditions with the help of further research based on the identified factors. We will see in the forthcoming years whether there is a political will for achieving this goal, whether the consciousness of BiH citizens will change, and whether they will seek transition from socialist to democratic values. The future of PPP models in those countries whose structure can be built on the basis of these critical success factors also depends on that transition.

The research was accompanied by certain limitations that may have an impact on the projected results and implications for further research. A potential limiting factor in this research is the fact that this process included only the transition economy of Bosnia and Herzegovina, which also opens the possibility to complete the results of this research through future research, which would include other transition condition of PPP markets.