PPPs allow governments to
leverage the expertise and skills of the private sector to improve the quality
and accessibility of public systems, without burdening public finances. It can
provide more Value for Money (VfM) compared to traditional forms of procurement
and production, which does not transfer risks to the private sector. VfM is
defined as the optimum combination of whole life cost and quality to meet the
user’s requirement. Value for money depends on appropriate risk transfer
between the public and private sectors.
The main concept is that
PPP delivers all kinds of work for the public sector where in return, the
private sector receives payment, above the price that the public sector could
have achieved the work, linked to its performance in meeting agreed standards
of provision. The initial idea is that the private concessionaire provides
public infrastructure at no cost to the government. PPP is borne basically from
the interest of upgrading the alternatives of the standard model of public
procurement especially the public infrastructure, which was traditionally
provided by the government. Thus, PPP is designed as an alternative structure
between acquisition through government ownership and full privatization.
partnerships (PPPs) are characterized by the degree to which the public and
private sectors share the risks, obligations, and benefits of a project. The
mix of public and private responsibilities and the risk allocation scheme used
vary from project to project, and the structure of the partnership depends on
the particular mix of responsibilities. The mix of financing instruments
between the public and private sectors can be very diverse. The private parties
may include firms specializing in public/private infrastructure, construction
companies, equipment manufacturers, operations specialists, real estate
developers, and various advisors.
Under the PPP Contract,
The Government retains strategic control on the service, secures new
infrastructure projects which generally reverts back to the Public Sector at
the end of the Contract Duration, and allocates project and performance risks
to the party(ies) best able to manage or mitigate these risks.