Currently, physical and social infrastructures, services, and projects entail enormous capital, skill, and creativity. It is, therefore, apparent that because of the challenges facing governments and constraints such as inadequate funds, most administrations are seeking the assistance of the private sector. This increasing blend of government involvement with business throughout the development and operation of such assets and services is accorded the name Public-Private Partnership (PPP), which has been found to be efficient in delivering quality infrastructure and service.
Concept of Public-Private Partnership (PPP)
PPP is an arrangement between a government agency at the local, regional or national level and a private partner seeking to provide public service of infrastructure facilities in the sphere of local importance. In PPP, the roles of risk, responsibilities and returns are divided between the government and a private sector partner. The government has frequently offered regulation, capital or sites, whilst the private sector has supplied know-how, equipment, creativity and, more usually, most of the funding.
PPP can spread across many fields like transport (highways, bridges, airport), utilities (water supply, power, sewerage), health, education and housing among others. The basic idea of PPP is to find value that no sector can realize on its own as a result of the partnership between private and public entities.
The Evolution of PPPs
PPPs as an idea is not new. Extending back to the work done during the Roman Empire, such as the construction of roads and aqueducts, public projects resonated with private investors. However, the application of the concept of PPPs has evolved in terminologies in recent decades, especially in the 1980s and 1990s. When privatization and deregulation became fashionable, most governments started aiming at cutting them in the provision of public services and looked for private operators to assist in devising and implementing facility plans.
Key Features of PPPs
- Risk Sharing: The politics of risk and reward is another striking feature of PPPs, where risks are borne jointly by the public and the private players. These could be financial risk, operation risk or technical risk. It is not that the private sector totally relinquishes facility management responsibilities to the public sector; instead, the balance is struck in such a manner that the private stakeholders assume most of the operation and financial risk and the public financiers keep most policy and regulatory remits.
- Long-term Contracts: PPP agreements have relatively long durations that can vary from even up to 20-30 years or more. These agreements capture the specific details of what each party must do, be expected to do, and when such actions must be accomplished hence facilitating contractual liability and consistency in project delivery.
- Efficiency and Innovation: The private sector is motivated to bring the best solutions and best practices with regard to efficiency in order to increase its revenues. This called integrated process improvement and embraces first, the application of efficient production and information technology, second, the design of efficient project design and third, the acquisition of efficiency in relation to construction and operation cost. This innovative change also brings positive outcomes to service delivery in the public sector.
- Value for Money (VFM): Thus, on practical level, one of the main goals of the PPPs is to ensure value for money. Such processes help governments foster the contractual cooperation with suppliers for delivering sophisticated services for less money than that of public procurement. This is through competition pricing, contractual provisions, and work and merits accomplishment-based contracts and projects.
- Public Interest and Accountability: Despite the fact it is implemented by the private sector, the public interest is uppermost. It is the responsibility of the governments to ensure that the project is in line with policies, meets requirements set by various authorities and brings the social impact that the society is supposed to receive from such a project. Transparency, accountability, and good corporate governance structures are important to fulfil the obligations of the public.
Types of Public-Private Partnerships
- Build-Operate-Transfer (BOT): In this model, the private sector undertakes the responsibility of funding, building and managing the project for sometime. After the completion of the contract the government seizes the control of the project from the involve party. This common in infrastructural development like roads, bridges and installation of power plants.
- Design-Build-Finance-Operate (DBFO): As such the private sector is involved in two ways; the design and construction of the project through financing and the running of the project. However, in the Bot, ownership of the asset can be transferred to the private sector where the government will pay for the use of the asset throughout the useful life of the project.
- Operation and Maintenance (O&M): This is where the government transfers the responsibility of running and managing an extant government entity, for instance a transport or water company or whatever to the private sector. The ownership of the asset remains with the government while the efficiency on management being exercised by the private sector.
- Concessions: A concession agreement gives the right of running and generating profit from a certain public utility for a specified period of time. During the concession period asset are usually transferred back to the public sector at the end of the concession period. This model is especially common in fields like water, telecommunications and tolls roads.
Benefits of Public-Private Partnerships
- Access to Capital: National governments, let alone finding ways to raise sizeable sums of money for massive infrastructure investments. Through PPPs, governments are able to leverage private capital and, aside from minimizing their reliance on official development assistance, are able to meet immediate infrastructure requirements without borrowing.
- Innovation and Efficiency: That is the secret and the pros that come with the participation of private companies in a particular or in public projects. The private sector’s competitiveness injects the aspect of efficiency and cost cutting in an effort to meet the agreed time and cost requirements for a given project.
- Quality Service Delivery: In view of the outcome-based nature of PPPs in particular, services are usually profound and highly effective. This leads to enhanced systems to implement infrastructural and service delivery options which in turn satisfy the end-users.
- Risk Mitigation: Thus, including PPP, the share of risks goes to the both sides of the project which reduces the financial and performance risks for large scale projects. Another reason is that the private sector has more experience and capability for handling such risks than public sector organizations.
- Economic Growth: Positive PPPs are effective economic growth drivers because they create employment opportunities, encourage innovation and attract other forms of investment. Hence, infrastructure projects particularly have the potential to raise the connectivity level, productivity and, indeed, business prospects.
Conclusion
Public Private Partnership (PPP) is the new model of development for governments that seeks to supply quality infrastructure and service delivery while facing the problem of budgetary shortages for the provision of a number of services. Getting the best out of both worlds, PPPs can help bring solutions that would work ideally for society. Yet these partnerships only work if they are properly managed, for which a clear governance structure is essential, and if all those partners involved are keen to ensure that everyone else’s interests will be protected. Consequently, PPPs are set to become even more highly utilized as the desire for infrastructure and services around the globe increases on the way to the future.
