Thursday, December 01, 2011

Public Private Partnerships: What and How?

Public Private Partnership (also referred to as ‘PPP’, P3) is a mutually agreed business relation between the government and one or more private owned companies, to deliver a public project. Typically under the PPP route, the government conceptualizes a particular project, decides on the risk and reward sharing mechanism between itself and the private company, followed by bid process for selection of such private partner. The project is often done through a Special Purpose Vehicle (SPV) route, where both the partners share investments.

From the days of World War II to about 1970s, governments across the globe had spend a significant amount of resources in creating public infrastructure services, such as roads, power plants, water distribution systems etc. Also by this time the notion that people at large should get these services for free – was slowly changing. Therefore new models for creation of large infrastructure projects were been analyzed, which would take some burden off from the governments as well as result in people paying a rational price for use of such services.

PPPs thus came into fashion. The novel idea behind a PPP is that such a partnership should bring the best of its partners. While the government’s role is seen as the one who provides for capital, use of assets, and responsibility for social and environmental concerns; the private company is expected to bring in efficiencies in the form of better project management, speedy and on-time delivery, and innovation in execution and operation.

PPP is today successfully tried in almost all of the developed and majority of the developing countries. International donor agencies, such as the World Bank, Asian Development Bank and the Japan Bank for International Cooperation have been the key proponents of PPP and its spread to the rest of the nations. The sectors / industries where by and large PPP projects have been widely used are:
· Roads and Highways
· Gas Pipelines
· Electricity Generation and Distribution
· Water Distribution and Treatment
· Stadiums

PPPs have got their share of failure stories as well. At some of the instances projects have gone completely off-scale due to differences between the government and the chosen private company. Often these differences arise from the deviation in return on investment expectations of the private company. However a well devised PPP project is worth its try as it helps in bringing benefits to the public at large.

For more on PPPs and Popular PPP Models, please see the link below:

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