Content

Public Private Partnership

(PPP)
Public Private Partnership
• Public private partnerships (PPPs) are
arrangements between government and private
sector entities for the purpose of providing
public infrastructure, community facilities and
related services.

• Such partnerships are characterized by the

sharing of investment, risk, responsibility and
reward between the partners.

• The reasons for establishing such partnerships

vary but generally involve the financing, design,
construction, operation and maintenance of
public infrastructure and services.
When to partner with the private sector
• the service or project cannot be provided with
the financial resources or expertise of the local
government alone
• a private partner would increase the quality or
level of service from that which the local
government could provide on its own
• a private partner would allow the service or
project to be implemented sooner than if only
the local government were involved
• there is support from the users of the service for
the involvement of a private partner
When to partner with the private sector
• there is an opportunity for competition
among prospective private partners
• there are no regulatory or legislative
prohibitions to involving a private partner in
the provision of services or a project
• the output of the service can be measured and
priced easily
• the cost of the service or project can be
recovered through the implementation of user
fees
When to partner with the private sector
• the project or service provides an opportunity
for innovation
• there is a track record of partnerships between
local government and the private sector
• there are opportunities to foster economic
development

If none of the above conditions exist, public

private partnerships should not be
considered.
 Advantages of PPP

1. Potential long-term gains in terms of efficiency

-Right projects, right structure, right procurement
process
2. Potential long-term gains in terms of effectiveness
-Obtaining desired outcomes in a timely and cost
effective manner
3. Ensure the necessary investments into public sector and
more effective public resources management;
 Advantages of PPP
4. A private entity is granted the opportunity to obtain a
long-term remuneration;

5. Private sector expertise and experience are utilized in

PPP projects implementation;

6. Appropriate PPP project risks allocation enables to

reduce the risk management expenditures;

7. Supplementing limited public sector capacities to

meet the growing demand for infrastructure
development
Sectors in which PPPs have been completed worldwide
• power generation and distribution,
• water and sanitation,
• refuse disposal,
• pipelines,
• hospitals,
• school buildings and teaching facilities,
• stadiums,
• air traffic control,
• prisons,
• railways,
• roads,
• billing and other information technology systems, and
• housing.
Types of Public Private Partnerships
• Operations and Maintenance
• Design-Build
• Turnkey Operation
• Wrap Around Addition
• Lease-Purchase
• Temporary Privatization
• Lease-Develop-Operate or Buy-Develop-Operate
• Build-Transfer-Operate (BTO)
• Build-Own-Operate-Transfer (BOOT)
• Build-Own-Operate (BOO)
Operations and Maintenance

• The local government contracts with a private

partner to operate and maintain a publicly
owned facility.
Local Government Applications
• A broad range of municipal services including
water and wastewater treatment plants, solid
waste removal, road maintenance, parks
maintenance/ landscape maintenance, arenas
and other recreation facilities, parking
facilities, sewer and storm sewer systems.
Design-Build
• The local government contracts with a private
partner to design and build a facility that
conforms to the standards and performance
requirements of the local government.

• Once the facility has been built, the local

government takes ownership and is
responsible for the operation of the facility.
Design-Build

• Local Government Applications

Most public infrastructure and building projects,
including roads, highways, water and
wastewater treatment plants, sewer and
water systems, arenas, swimming pools and
other local government facilities
Turnkey Operation
• The local government provides the financing for
the project but engages a private partner to
design, construct and operate the facility for a
specified period of time.
• Performance objectives are established by the
public sector and the public partner maintains
ownership of the facility.
• This form of public private partnership is
applicable where the public sector maintains a
strong interest in ownership but seeks to benefit
from private construction and operation of a
facility.
Turnkey Operation

• Local Government Applications

This would include most infrastructure facilities,
including water and wastewater treatment
plants, arenas, swimming pools, golf courses
and local government buildings.
Wrap Around Addition
• A private partner finances and constructs an
addition to an existing public facility.

• The private partner may then operate the

addition to the facility for a specified period of
time or until the partner recovers the
investment plus a reasonable return on the
investment.
Wrap Around Addition
• Local Government Applications
Most infrastructure and other public facilities,
including roads, water systems, sewer
systems, water and wastewater treatment
plants, and recreation facilities such as ice
arenas and swimming pools.
Lease-Purchase
The local government contracts with the
private partner to design, finance and build a
facility to provide a public service.

The private partner then leases the facility to

the local government for a specified period
after which ownership vests with the local
government.
Lease-Purchase
• This approach can be taken where local
government requires a new facility or service
but may not be in a position to provide
financing.

Local Government Applications

Can be used for capital assets such as buildings,
vehicle fleets, water and wastewater
treatment plants, solid waste facilities and
computer equipment.
Temporary Privatization
• Ownership of an existing public facility is
transferred to a private partner who improves
and/or expands the facility.

• The facility is then owned and operated by the

private partner for a period specified in a
contract or until the partner has recovered the
investment plus a reasonable return
Temporary Privatization
• Local Government Applications
This model can be used for most infrastructure
and other public facilities, including roads,
water systems, sewer systems, water and
wastewater treatment plants, parking
facilities, local government buildings, airports,
and recreation facilities such as arenas and
swimming pools.
Lease-Develop-Operate or Buy-Develop-Operate

• The private partner leases or buys a facility

from the local government, expands or
modernizes it, then operates the facility under
a contract with the local government.

• The private partner is expected to invest in

facility expansion or improvement and is given
a specified period of time in which to recover
the investment and realize a return.
Lease-Develop-Operate or Buy-Develop-Operate
• Local Government Applications
Most infrastructure and other public facilities,
including roads, water systems, sewer
systems, water and wastewater treatment
plants, parking facilities, local government
buildings, airports, and recreation facilities
such as arenas and swimming pools.
Build-Transfer-Operate
• The local government contracts with a private
partner to finance and build a facility.
• Once completed, the private partner transfers
ownership of the facility to the local
government.
• The local government then leases the facility
back to the private partner under a long-term
lease during which the private partner has an
opportunity to recover its investment and a
reasonable rate of return.
Build-Transfer-Operate
• Local Government Applications
Most infrastructure and other public facilities,
including roads, water systems, sewer
systems, water and wastewater treatment
plants, parking facilities, local government
buildings, airports, and recreation facilities
such as arenas and swimming pools
Build-Own-Operate-Transfer

• The private developer obtains exclusive

franchise to finance, build, operate, maintain,
manage and collect user fees for a fixed period
to amortize investment.

• At the end of the franchise, title reverts to a

public authority.
Build-Own-Operate-Transfer

• Local Government Applications

Most public infrastructure services and facilities,
including water and Wastewater systems,
recreation facilities, airports, local government
administration and operations buildings,
parking facilities and solid waste management
facilities.
Build-Own-Operate
• The local government either transfers
ownership and responsibility for an existing
facility or contracts with a private partner to
build, own and operate a new facility in
perpetuity.

• The private partner generally provides the

financing.
Build-Own-Operate

• Local Government Applications

Most public infrastructure and facilities,
including water and wastewater systems,
parking facilities, recreation facilities, airports,
local government administration and
operations buildings.
 Limitations of PPP
The major limitations include:
- Not all projects are possible (for various reasons: political,
legal, commercial viability, etc.).
- The private sector may not be interested in a project due to
perceived high risks, or it may lack the capacity to implement
the project.
- A PPP project may be more costly unless additional costs
(due to higher transaction and financing costs) are off-set by
efficiency gains.
- Change of ownership of an infrastructure to the private
sector may not be sufficient to improve its economic
performance unless other necessary conditions (appropriate
sector and market reform, and change in operational and
management practices of infrastructure operation) are met.
- Often, the success of PPPs depends on regulatory efficiency.
Thank You