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A public private partnership (PPP) is a coordination method in which a public authority calls on private sector entities to make infrastructure available and/or provide a public service.
The private sector partner may be responsible for all or part of the following tasks:
In exchange, the private partner receives payment from the public partner and/or the users of the service it operates. This funding method is used in many countries in one form or another.
In a PPP, the interests of the co-contractors converge, with a view to managing a public service over the long term. A PPP thus constitutes a “win-win-win” relationship (private sector partner / public authority / user-citizen), which constitutes the best guarantee of the partnership’s durability.
- In a public private partnership, the public authority can count on the private sector partner to provide substantial efficiency. The public partner thus does not “execute” but rather manages and oversees execution, which is carried out by the co-contractor.
- In this way, the public authority can focus on defining and tracking the targets to be achieved, leaving it up to the private sector operator to determine the resources and innovations to be employed.
Most public-private partnerships (PPPs) are comprehensive contracts. They are effective because of the synergies created between the contract’s various components:
The private sector partner has incentive to undertake very high quality capital investments during the infrastructure construction or renovation phase, in order to prepare for the operations phase.
Efficient sharing of risks
- Public private partnerships make it possible to efficiently share out the risks associated with the various projects. The risks to be covered by the private sector partner and those to be assumed by the public sector are spelled out during preparatory phases of the contract (preliminary assessment, negotiation). A balanced sharing of risks ensures that public funds are put to the best possible use.
Adaptability / long-term approach
- Public private partnerships are complex, long-term contracts. These contracts must be adapted to changing circumstances as time goes on. Such changes are a source of performance improvement and often afford an opportunity to introduce innovations. They give the contract the required flexibility.