Public-Private Partnerships

The introduction of PPP

About This Project

A cardinal principle behind PPP is that it is intended to transform government departments from being owners and operators of assets into purchasers of services from the private sector.

 

PPP is a contractual arrangement between a government entity and a private firm that incentivises the private firm to design, build, maintain and finance public infrastructure effectively and efficiently.
 

This involves a new discipline for the public sector: it must define the service that it wants to buy over the long term, establish a fair mechanism that incentivises the private sector to deliver that service, and manage a long-term service contract. More often than not the public sector will not have thought about such a long timeframe, often just focusing on next year’s budget.
 

The fairness of the payment mechanism established to incentivise the private sector to deliver the service on time and within the budget is critical. It requires a system of checks and balances to ensure a fair balance of rights and responsibilities between public and the private sector. Due to these disciplines PPP, as a form of public service procurement, will usually lead to this reform of public service delivery through service improvement, a commitment to transparency and obtaining better value for money.
 

The introduction of PPP is sometimes seen by governments to have the additional advantage of increasing the capacity and stimulating the capability of the private sector.
 

When government engages with the private sector, and when it commissions PPPs, we need to remember that the ultimate objective is to deliver better services, not merely to procure new infrastructure.