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Stages of a BOOT project where private sector expertise and finance are
vital to exploit the commercial potential of go-
Build: vernment assets.
• Design
• Manage project implementation Generally, governments’ key objectives when com-
• Carry out procurement missioning a PPP are:
• Finance A. To maximise value for money of providing a
• Construct service over a long time scale (25 to 30 years).
Maximising efficiency and innovation helps to
Own: achieve value for money
• Hold interest under concession B. To transfer maximum risk to the private sector
consistent with the governments’ economic
Operate: policy and status.
• Manage and operate facility
• Carry out maintenance
• Deliver products/service Why should public or state authorities consi-
• Receive payment for product/service der PPP?
There are a number of factors, relating to public
Transfer: sector cash constraints and the underlying princi-
• Hand over project in operating condition at ples of PPP, which might cause governments to
end of concession period consider the introduction of a PPP.

a. Public sector cash constraints in many
The development of PPP countries, demand for new infrastructure
projects is growing in quality and quantity. In
The concept of a PPP – Public Private Partnership addition there is the rising pressure for funds
has been adopted by various governments in re- to renew, maintain and operate the existing
cent years. Instead of the public-sector procuring infrastructure. Competition for such funding
a capital asset and providing a public service, the is often intense not just between infrastructure
private sector create the asset through a single projects but also with the many other deman-
stand alone business (financed and operated by ds on public sector finance. PPP permits the
the private sector) and then deliver a service to the authorities to substantially reduce capital ex-
public sector client, in return for payment linked to penditure and convert the infrastructure costs
the service levels provided. into affordable operating expenditure spread
over an appropriate timescale.
Various governments in recent
years have adopted the concept b. Principles of PPP: PPP allows each partner
to concentrate on activities that best suit their
“of a PPP – Public Private respective skills. For the public sector the key
Partnership skill is in developing policies on service needs
and requirements, while for the private sector
the key is to deliver those services at the most
There are three main efficient cost.
categories of PPPs Key Benefits of PPPs
a. Infrastructure created through PPP can impro-
1. The introduction of the private sector owner- ve the quality and quantity of basic infrastruc-
ship into state-owned businesses, using the ture such as water, energy supply, telecom-
full range of possible structures (whether by munications and transport as well as being
flotation or the introduction of a strategic part- widely applied to other public services such
ner) with sales of either a majority or a minority as hospitals, schools and prisons. The public
stake; have access to improved services now, not
2. Arrangements where the public sector con- years away when a government’s spending
tracts to purchase quality services on a long- programme permits.
term basis so as to take advantage of priva- b. Value for money PPP projects deliver grea-
te sector management skills incentivised by ter value for money compared with that of
having private finance at risk. This includes an equivalent asset procured conventionally.
concessions and franchises, where a private The combination of design construction and
sector partner takes on the responsibility for operation outweigh the higher cost of finance.
providing a public service including maintai- PPP focuses on procurement process on the
ning, enhancing or constructing the necessary whole life cost of the project not simply on its
infrastructure. initial construction cost. It identifies the long
3. Selling government services into wider mar- term costs and assesses the suitability of the
kets and other partnership arrangements project.

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