Public-Private Partnerships (PPPs) are being widely used as a procurement method by governments all over the world. The objective of such partnerships is to better serve the public through partnering arrangements with private sector.
In PPP program, the Government sees itself becoming more of a regulator and less a provider of public services. A clear and fair sharing of risks in financing, developing, operating and maintaining infrastructure services between the public and private sector, based on a mutual commitment to achieve a desired public sector outcome while obtaining appropriate rate of returns for the private sector, is a distinguishing feature of PPP projects and essential for their success.
PPPs involve the financing, development, operation and maintenance of infrastructure by the private-sector which would otherwise have been provided by the public sector. Instead of the public sector procuring a capital asset and providing a public service, the private sector creates the asset through a dedicated standalone business (usually designed, financed, built, maintained and operated by the private sector) and then delivers a service to the public sector entity/consumer in return for payment that is linked to performance. Therefore the public sector is able to redirect its efforts to serving other urgent social and economic needs. A PPP may include an equity joint venture between government and the private sector.
The capital and operational expenses incurred by the private investor can be recovered under the PPP modality by charging users for the service provided or via fixed (or partially fixed) periodic payments (annuities) disbursed by the public sector over the concession period, or by a combination of both.
PPPs allow each partner to concentrate on activities that best suit their skills. For the public sector this means planning and identifying infrastructure service needs and focusing on developing national, provincial and local sector-specific policies, but also to oversee these and to enforce the PPP agenda. For the private sector, the key is to deliver effectively the infrastructure and facilities required by the public sector and consumers at the project level.