Features of PPPs Even though there is no universal consensus on the definition of public-private partnerships, the following elements mainly characterize PPPs: PPPs are typically contractual or institutional arrangements between the public sector and the private party to provide infrastructure services and other essential available services.
The infrastructure or service is financed, in whole or in part, by a private partner;
The private sector prepares project documents, finances the construction of infrastructure (wholly or partially), and further manages and maintains it and carries out public interest (public service), for which it receives appropriate compensation from the general partner or end-users. (third parties) of public services;
The public partner reserves the right to determine the goals to be achieved, in terms of the quality of available services, the prices of public services, and control over their realization; The contract duration for PPPs is relatively long; Risks are divided between the public and the private partner, determining the party which is better positioned for manage each risk.
But PPPs do not in themselves mean that it is a private partner, the one who always assumes all or most of the risk. The risk distribution is explicitly determined for each case. Public-Private Partnerships are a procurement tool, in which the focus is on payment for successful service delivery (transfer of performance risk to the private partner).PPPs are output / performance-based arrangements (the traditional public service delivery model is “input-based”).PPPs usually include “batch” services (e.g., design, construction, maintenance, and operation) to maximize synergy and not encourage low capital / high operating cost proposals. Overall, PPPs provide a new and dynamic approach to risk management in providing infrastructure and services.” PPPs keep their promise to increase the supply of infrastructure without burdening the public finances of the state. An infusion of capital and private management can facilitate fiscal constraints and increase efficiency…” MFI, Finance, and development.
The main advantages, benefits, and challenges of PPPs
It is important to note that not all projects are suitable for PPP. Public-Private Partnerships should provide equal or better value for money compared to 100% public sector access. Value for money is the primary driver in public-private partnerships. Value for money does not merely mean selecting the cheapest bid or the lowest asset price, but it means finding the best long-term choice for service delivery. It includes analyzing the total long-term cost (life cycle cost) of service delivery and the assessment of associated benefits to the general public. When compared to the public sector approach, the additional benefits of PPPs can come from:
Faster implementation of infrastructure projects
Better services and coverage;
Service delivery life cycle focus / lower life cycle cost(long term);
Improved efficiency and innovation; and
Risk-sharing is designed to create an impetus towards success.
