Public Private Partnership (PPP) is a contract between a public sector institution/municipality and a private party, in which the private party assumes substantial financial, technical and operational risk in the design, financing, building and operation of a project.
Traditionally, private sector participation has been limited to separate planning, design or construction contracts on a fee for service basis – based on the public agency’s specifications.
Expanding the private sector role allows the public agencies to tap private sector technical, management and financial resources in new ways to achieve certain public agency objectives such as greater cost and schedule certainty, supplementing in-house staff, innovative technology applications, specialized expertise or access to private capital. The private partner can expand its business opportunities in return for assuming the new or expanded responsibilities and risks.
PPPs provide benefits by allocating the responsibilities to the party – either public or private – that is best positioned to control the activity that will produce the desired result. With PPPs, this is accomplished by specifying the roles, risks and rewards contractually, so as to provide incentives for maximum performance and the flexibility necessary to achieve the desired results
What is not a PPP ?
The way a PPP is defined in the regulations makes it clear that:
- A PPP is not a simple outsourcing of functions where substantial financial, technical and operational risk is retained by the institution
- A PPP is not a donation by a private party for a public good
- A PPP is not the 'commercialisation' of a public function by the creation of a state-owned enterprise
- A PPP does not constitute borrowing by the state.