Public Private Partnership (PPP) is a long-term contractual agreement between a government agency and a private sector entity to develop public service facilities and infrastructure assets. The core objective of the PPP project delivery model is to use less public money and raise private capital through a mutual reward and risk-sharing agreement with a private entity or a consortium of private sector entities. The participation of the private sector in public-private partnership projects ensures the inflow of private investment, technology, expertise, and better quality.



Table of Content
PPP - Definition
Why PPP?
Main objectives that the project has to achieve
How do Public Private Partnerships work?
PPP contract types
The involvement of private and public partner in different PPP contracts
Stages in PPP project development and implementation
Identifying potential PPP projects and inviting private parties for implementation
Project development and due diligence
Procurement and project construction
Contract management
Dispute resolution
Financing of PPP projects
Understanding the private sector's requirements in PPP
Government support in PPP projects
Risks involved in Public-Private Partnership Projects
Major PPP projects in India
Major PPP projects in the USA
Major PPP projects in Europe
The Bottom Line


PPP - Definition
No formal definition exists for PPP. The different national governments may define the term differently. However, it is understood as any medium or long-term association between the government or government-affiliated entities and private sector entities. This partnership between public and private entities is based on sharing risks and rewards.



The private sector may invest its resources, including private capital, expertise, and skills in return for financial gain. Similarly, the public sector may make regulatory and policy changes to deliver desired outcomes of building a public infrastructure asset. Optimal structuring connects private sector profitability to long-term performance, resulting in robust and appealing cash flows for investors in exchange for improved value for money for taxpayers.



Why PPP?
The PPP method allows optimal risk allocation among the project participants. It also minimizes the overall costs, makes the process less bureaucratic, and achieves project development goals. For the risk it takes, the private sector receives a reasonable rate of return on its investment through the revenue stream once the project starts operation.



It often involves the private entity taking over the design, construction, and operation of the built infrastructure facilities. Earlier, such projects were exclusively reserved for public sector enterprises. However, constraints in financing options and other liabilities on the public treasury have paved the way for private-sector companies to participate in the ventures.



The essential principle of PPP infrastructure projects is the concept of task division and project risk sharing by efficient cooperation and coordination in terms of project planning, project finance, and a clear contractual agreement for construction, operation, and ownership of the facility. The private sector participation comes with its own profit-making objectives, and public partners take responsibility for the respective general-interest objectives while keeping public funding out of the PPP transactions.



Main objectives that the project has to achieve
A PPP is not an option for addressing the problem of inadequate infrastructure services, but it could be a suitable project implementation or procurement method for a preferred alternative solution. However, in general, public-private partnership projects can satisfy both infrastructure and utility service needs as well as government policy objectives.



How well the proposed project meets these objectives for infrastructure investment is a fundamental concern. For this, the implementing agency responsible for executing PPP projects should assess the preliminary needs first. In most cases, a PPP project generally fulfills the following objectives:



A PPP would be a suitable project implementation/procurement choice without risking a huge amount of public money.
A P3 project can help governments achieve some of their key objectives without funding from the public treasury by allowing private sector participation.


The objectives may vary as per the level of stakes held by the concerned parties involved in PPP transactions. It is also crucial to consider the government's stake in the proposed project. The government's stake depends upon the nature of public infrastructure services being built in the PPP model, their strategic significance, impacts on other critical sectors of economic development, public safety and security, and the use of a particular natural resource.