There is no single, internationally accepted definition of Public Private Partnerships, generally it is 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.
The project functions transferred to the private party such as design, construction, financing, operations, and maintenance may vary from contract to contract, but in all cases the private party is accountable for project performance and bears significant risk and management responsibility. PPP contracts typically allocate each risk to the party that can best manage and handle it, risk transfer to the private party is not a goal, but is instrumental for full transfer of management responsibility and for the alignment of private interests with the public interest.
We work with our business partners as their long-term partner, providing financial support and global expertise for the development, design, construction, and operation of projects. We provide communities with safe transportation, and state-of-the-art social infrastructure, while also creating jobs during the construction and operation of a project. We invest our own and business partners equity secure financing for Public-Private Partnerships to deliver our promise to provide sustainable projects to the communities where we operate.
And we consider the balance between construction and long-term operational costs and can deliver significant financial and environmental benefits.
Most PPP projects present a contractual term between 20 and 30 years; others have shorter terms; and a few last longer than 30 years. The term should always be long enough for the private party to have an incentive to integrate service delivery costs considerations into the design phase of the project. This includes maintenance considerations as well, in order for the trade-offs between initial investment cost and future maintenance and operation costs to be optimized. The “whole-life” approach, considering whole-life costs and whole-life benefits, maximizes the efficiency of service delivery. It is at the core of the rationale for using PPPs for the delivery of public services. The precise length of the contract depends on the type of project and policy considerations. Policy makers need to satisfy themselves that the demand for the services delivered by the project will be sustained over the whole life of the contract; the private party should be able to accept responsibility for service delivery over its term; and the procuring authority should be able to commit to the project for its term. The availability of finance, and its conditions, may also influence the term of the PPP contract.
Which Function to combine?
PPPs are described in terms of three broad parameters
What functions the private party is responsible for?
What functions the private party is responsible for?
What functions the private party is responsible for?
Models
Many PPPs involve new assets, often called greenfield projects. For example, the United Kingdom’s PPP program, the Private Finance Initiative (PFI), involved private companies in financing, building, and managing new public assets, from schools and hospitals to defense facilities. PPPs can also be used to transfer responsibility for upgrading and managing existing assets to a private company, or brownfield projects.
In either case, a key feature of a PPP is that the assets or services provided are specified in termsof outputs rather than inputs, that is, defining what is required, rather than how it is to be done. A central characteristic of a PPP contract is that it bundles together multiple project phases or functions. Nonetheless, the functions for which the private party is responsible vary and depend on the type of asset and service involved.
DBFOM
DBFO
DCMF
BOT
BOOT
BTO
ROT
Rehabilitate may take the place of Build where the private party is responsible for rehabilitating, upgrading, or extending existing assets.
PFI
The United Kingdom was one of the first countries to introduce the PPP concept under the term Private Finance Initiative, or PFI. It is typically used to describe a PPP as a way to finance, build and manage new infrastructure.
O & M
Operations and Maintenance contracts for existing assets may come under the definition of PPP where these are performance-based, long-term, and involve significant private investment (sometimes also called performance-based maintenance contracts).
Typical Functions
D esign : (also called engineering work), involves developing the project from initial concept and output requirements to construction ready design specifications.
M aintain : PPPs assign responsibility to the private party for maintaining an infrastructure asset to a specified standard over the life of the contract. This is a fundamental feature of PPP contracts.
F inance:when a PPP includes building or rehabilitating the asset, the private party is typically also required to finance all or part of the necessary capital expenditure.
O perate : The operating responsibilities of the private party to a PPP can vary widely, depending on the nature of the underlying asset and associated service.
B uild, or Rehabilitate : when PPPs are used for new infrastructure assets, they typically require the private party to construct the asset and install all equipment. Where PPPs involve existing assets, the private party may be responsible for rehabilitating or extending the asset.