What is a PPP?
PPP is a contractual arrangement for the acquisition of public assets and the provision of public services. PPP contracts can include those to build and manage new infrastructure, those to carry major upgrades to existing infrastructure (known as infrastructure PPPs) and those under which a private partner manages existing infrastructure or merely provides or implements public services (known as service PPPs or public service delegations).
More specifically, a "privately financed" PPP contract is a long-term contract between a public party and a private party for the development (or for a major upgrade or renovation) and management of a public asset (including, possibly, the management of a related public service), where the private party bears significant risks and management responsibilities for the duration of the contract, provides a large part of the financing at its own risk and the remuneration is based on the performance and/or demand or use of the good or service in order to reconcile the interests of both parties.
The missions that may be assigned by the government to a private stakeholder under a PPP-type agreement are as follows :
- Design and/or
- Financing and/or
- Construction (or conversion) and/or
- Operation and/or
- Maintenance
These tasks determine the type of PPP contract: Public-private partnership / Lease contract / Public service delegation / Build Operate Transfer contract (BOT), in various forms / Publicly Funded Partnership Agreement, etc.
Characteristics of PPPs
PPPs can be classified as:
- Concessive models of PPPs (the financing of payments relies on royalties of "tariffs" paid by users) or
- PPP with public payment (payments are financed from the government budget).
PPPs can be referred to by a variety of names; the most common alternate terms are ‘concession’ (for concession- type PPPs) and ‘PFI’ (for public-financed PPPs).
Privately financed contracts are not required for a contract to be considered a PPP. Involving the private sector in financing can not only speed up infrastructure development but also bring additional efficiency benefits.
PPP does not mean privatization.