Given their very nature and application. the definition of a “Public Private Partnership” ( PPP ) varies. Broadly. PPP’s are a contractual model that enables authorities to work with the private sector to supply public services or substructure. This cooperation can be achieved at each or every phase along the life rhythm of the undertaking. including funding. building and operation of the undertaking. Although the private sector has been working with the populace sector for many old ages. PPP’s represent a formalistic model that authoritiess are progressively using to develop their relationships with the private sector.
The success of this pattern is based on the premiss that in many instances. the private sector is able provide a higher degree of invention. better entree to finance and expertness in bringing of the service than authorities. If structured and managed right. over the life of the undertaking. the PPP will supply value for money and cost the authorities less than if it had undertook the undertaking itself. It will besides let the private sector to bear some of the funding and runing hazard of the undertaking ( and gain a commercial return on this investing ) .
A Public Private Partnership should non be thought of as a “privatisation” or quasi-privatisation. Denationalization. by definition. is the transportation of ownership of province assets to private custodies. Notwithstanding any regulative and legislative demands. how that privatised entity is managed and operates is so outside the range of any farther authorities duty.
This is non the instance with PPP’s. While it can be said that the function of authorities alterations. authorities still plays a major function. In all instances. it is responsible for a project’s end product specifications and in many instances. paying for the services produced by the private sector. Payment nevertheless. is based on bringing of the contracted service to the specified demands. Ideally. a PPP allows a authorities to use the private sector to present public services or substructure that the authorities requires. in a mode that is more cost effectual and advanced than a purely authorities attack.
1. 1 Typical PPP Frameworks
Public Private Partnerships and their constructions depend on many changing factors. frequently single to each state of affairs. Table 1 provides a wide lineation of typical PPP relationships.
Table. 1 Type of PPP’s
PPP Contractual RelationshipDescription
Build and TransferThe authorities specifies the needed results and functionality. but is non needfully prescriptive in how this is achieved. The private sector bears the hazard and the plus is transferred to authorities to run upon completion. Operate and MaintainAn bing authorities plus is managed by the private sector. The contractor will be responsible for operating and keeping the plus while supplying the services to the client. Design Build OperateA combination of the Design & A ; Construction and Operate and Maintain. The Private contractor is besides responsible for financing the undertakings building. Upon completion and either before or after commissioning. the authorities buys the plus. The direction stays with the contractor but authorities retains ownership. Build Own Operate Transfer
The private spouse is responsible for financing the full lifecycle of the undertaking ( design. building. operations and care ) and owns and operates the undertaking through a grant period. In add-on. the private spouse bears all commercial hazard. The plus is so turned over to the authorities at the terminal of an in agreement term Build Own Operate. As above. except private spouse retains ownership of plus. Government agrees merely to buy services for a fixed period. Lease Own OperatePrivate Partner leases an bing plus from the authorities for a specified clip period. The plus may necessitate renovation but no new assets are built. The private spouse operates the plus throughout the life of the rental. Hazard Sharing AllianceGovernment and the Private contractor portion any possible hazards or windfalls associated with undertaking hazard. Issues such as pricing. service bringing criterions and costs are pre-determined between the authorities and the private spouse.
Over clip it has become progressively clear that there are certain common factors for developing successful PPP’s. While the construct of authorities working with the private sector is non new. the many challenges of developing and keeping government-private sector relationships has led many authoritiess to formalizing the implicit in policies and methodological analysiss of PPP’s. These policies and methodological analysiss help supply:
oClear and crystalline counsel to the private sector in constructing their relationship with authorities ; oGuidelines on how the authorities works with the private sector ; and oA degree of criterions at which the PPP will be carried out.
It is common for authoritiess to affect the private sector on undertakings that are non needfully defined as “public services” but where the proviso of a service is however deemed of import for national or regional development. Many authoritiess. in both development and developed economic systems. prosecute the private sector to supply either cardinal substructure or services.
Typical sectors where PPP’s have been applied include:
oRoads. Bridges and Railwaies
oWater Supply. Sanitation and Development
oPorts and Transporting
oOil & A ; Gas
oGovernment edifice adjustments
oProvision of accessory services to core authorities maps
Box 1. PPP’s: Not Just about Infrastructure
In many economic systems. the range of PPP’s has broadened. In add-on to the proviso of “traditional” undertakings such as substructure. states such as the UK and Australia have used PPP’s as a agency of supplying accessory services. such as edifice and keeping adjustment for tribunal houses and infirmaries and other municipal installations. Within these PPP’s nevertheless. authorities still delivers to the populace those services which it deems as “core services” .
In each of these instances. the authorities pays an in agreement service fee to private operator to supply pre-determined degree of service. quality and end product. leting the authorities to set about its “core services” such as keeping tests or supplying public medical attention. Any deficit in these degrees of end product or service ( for case courtroom handiness ) can be penalised by an in agreement sum.
PPP’s in these legal powers have witnessed new attacks to payment. where payments are based upon incentive mechanisms linked to results from the PPP. instead than use. For case in the United Kingdom so called “shadow tolls” have been implemented where a private expressway proprietor is paid harmonizing to the figure of autos who use that route and the congestion it alleviates on other roads. Rather than bear downing the user straight. payment is straight from the authorities. It besides ensures that the private route proprietor retains the inducement to properly design and keep the route as an effectual option to other more engorged roads.
Utility to turning economic systems
The construct of using PPP methodological analysiss could potentially be a manner that states use to better the bringing of public services. This would let the authorities to concentrate on its “core services” proviso. while reassigning the hazard associated with direction and operations of accessory activities to the private sector. If structured right. the inducements provided to the private sector could take to an overall betterment in public services in a state or part. On the payment side. in legal powers where private engagement is still comparatively new. or where political support for private sector engagement is still delicate. strategies such as shadow tolls or payment based on pre-determined service quality and degrees can guarantee that there is better value for money for authorities disbursement.
Case surveies of two non-infrastructure PPP’s have been included following the appendices of this study which were compiled by the Victorian Auditor general. The first is a regional infirmary in the Australian State of Victoria. The 2nd is for the County Court in Melbourne. Australia. 1. 2 Dedicated PPP Institutional and Policy Frameworks
One of the most common elements of all authoritiess that have actively undertaken PPP’s is to set up a formal Partnerships model to measure and ease undertakings.
Typically. while it is the Line Ministry that initiates PPP’s. many states have established dedicated Centre or section that can ease and supply aid on PPP’s development. Throughout the part. a figure of PPP Centres exist. These include:
oBangladesh Infrastructure Investment Centre ;
oPhilippines BOT Centre
oPICKO – Established at Korea Research Institute for Human Settlements
Outlines of these programmes are available in Appendixs 1. 2 and 3.
Where there is no dedicated Centre. a dedicated policy model and methodological analysis is established has been established for PPP’s. In this instance. the relevant line Ministry novices and develops the undertaking. in co-operation with the Finance Ministry. which must guarantee financial compatibility with the government’s budgetary ends.
Within the part. possibly the most developed and comprehensive PPP model is the “Partnerships Victoria” policy in the Australian province of Victoria. In this instance. the Victorian authorities applies and develops its PPP undertakings within a clearly defined policy model and methodological analysis.
Broad guidelines in Victoria ( every bit good as other Australian provinces ) require possible PPP undertakings to be tested extensively against the undermentioned points:
oBe in the public involvement ;
oHave the private parties proposed cost construction compared against a Public Sector Comparator ( PSC ) ( i. e. a theoretical account of the net costs of the proposal under a traditional Government-financed method of bringing ) ; and
oAchieve an optimum allotment of hazard between the public and private sectors ( instead than a ‘maximum’ transportation of hazard to the private sector ) .
It is deserving observing at this point that it is non a requirement to hold a dedicated section or establishment for successful PPP’s to be achieved. While many states have however established dedicated establishments. it is clear that the indispensable factor is to hold a robust PPP methodological analysis established which so can be efficaciously utilised by all practicians.