Public–private partnership (PPP) describes a government service or private business
venture which is funded and operated through a partnership of government and one or
more private sector companies. These schemes are sometimes referred to as PPP, P3
PPP involves a contract between a public sector authority and a private party, in which
the private party provides a public service or project and assumes substantial financial,
technical and operational risk in the project.
In some types of PPP, the cost of using the service is borne exclusively by the users of
the service and not by the taxpayer. In other types (notably the private finance initiative),
capital investment is made by the private sector on the strength of a contract with
government to provide agreed services and the cost of providing the service is borne
wholly or in part by the government.
Government contributions to a PPP may also be in kind (notably the transfer of existing
assets). In projects that are aimed at creating public goods like in the infrastructure
sector, the government may provide a capital subsidy in the form of a one-time grant, so
as to make it more attractive to the private investors. In some other cases, the
government may support the project by providing revenue subsidies, including tax
breaks or by providing guaranteed annual revenues for a fixed period.
Typically, a private sector consortium forms a special company called a "special
purpose vehicle" (SPV) to develop, build, maintain and operate the asset for the
contracted period. In cases where the government has invested in the project, it is
typically (but not always) allotted an equity share in the SPV. The consortium is
usually made up of a building contractor, a maintenance company and bank lender(s).
It is the SPV that signs the contract with the government and with subcontractors to
build the facility and then maintain it. In the infrastructure sector, complex arrangements
and contracts that guarantee and secure the cash flows and make PPP projects prime
candidates for project financing. A typical PPP example would be a hospital building
financed and constructed by a private developer and then leased to the hospital
authority. The private developer then acts as landlord, providing housekeeping and
other non-medical services while the hospital itself provides medical services.
2 The importance of public–private partnerships
7 See also
9 Further reading
10 External links
Origins: Pressure to change the standard model of public procurement arose initially
from concerns about the level of public debt, which grew rapidly during the
macroeconomic dislocation of the 1970s and 1980s. Governments sought to
encourage private investment in infrastructure, initially on the basis of accounting
fallacies arising from the fact that public accounts did not distinguish between recurrent
and capital expenditures.
The idea that private provision of infrastructure represented a way of providing
infrastructure at no cost to the public has now been generally abandoned; however,
interest in alternatives to the standard model of public procurement persisted. In
particular, it has been argued that models involving an enhanced role for the private
sector, with a single private-sector organization taking responsibility for most aspects of
service provisions for a given project, could yield an improved allocation of risk, while
maintaining public accountability for essential aspects of service provision.
Initially, most public–private partnerships were negotiated individually, as one-off deals,
and much of this activity began in the 1990's.
Britain: In 1992, the Conservative government of John Major in the United Kingdom
introduced the private finance initiative (PFI), the first systematic programme aimed at
encouraging public–private partnerships. The 1992 programme focused on reducing
the Public Sector Borrowing Requirement, although, as already noted, the effect on
public accounts was largely illusory. The Labour government of Tony Blair, elected in
1997, persisted with the PFI but sought to shift the emphasis to the achievement of
"value for money," mainly through an appropriate allocation of risk.
Australia: A number of Australian state governments have adopted systematic
programmes based on the PFI. The first, and the model for most others, is
Canada: The federal Conservative Government under Stephen Harper in Canada
solidified its committment to P3s with the creation of a crown corporation, P3 Canada
Inc, this in 2009. The Canadian vanguards for P3s have been provincial organizations,
supported by the Canadian Council for Public-Private Partnerships established in 1993
(a member-sponsored organization with representatives from both the public and the
private sectors). As proponents of the concept of public-private partnerships (PPP's),
The Council conducts research, publishes findings, facilitates forums for discussion
and sponsors an Annual Conference on topics related to PPP's, both domestic and
international. Each year the Council celebrates successful public-private partnerships
through the National Awards Program held concurrently with the annual conference in
The importance of public–private partnerships
Over the past two decades more than 1400 PPP deals were signed in the European
Union, which represent an estimated capital value of approximately €260 billion.
Since the onset of the financial crisis in 2008, estimates suggest that the number of
PPP deals closed has fallen more than 40 percent.[
4] These difficulties have placed significant strains on governments that have come to
rely on PPPs as an important means for the delivery of long-term infrastructure assets
and related services.
 Moreover, this has occurred precisely at a time when investments in public-sector
infrastructure are seen as an important means of maintaining economic activity during
the crisis, as was highlighted in a European Commission communication on PPPs.
 As a result of the importance of PPPs to economic activity, in addition to the
complexity of such transactions, the European PPP Expertise Centre (EPEC) was
established to support public-sector capacity to implement PPPs and share timely
solutions to problems common across Europe in PPPs.
A common problem with PPP projects is that private investors obtained a rate of return
that was higher than the government’s bond rate, even though most or all of the income
risk associated with the project was borne by the public sector.
It is certainly the case that government debt is cheaper than the debt provided to finance
PFI projects, and cheaper still than the overall cost of finance for PFI projects, i.e. the
weighted average cost of capital (WACC). This is of course to attempt to compare
incompatible and incomplete economic circumstances. It ignores the position of
taxpayers who play the role of equity in this financing structure. Making a simple
comparison, however, between the government’s cost of debt and the private-sector
WACC implies that the government can sustainably fund projects at a cost of finance
equal to its risk-free borrowing rate. This would be true only if existing borrowing levels
were below prudent limits. The constraints on public borrowing suggest, nevertheless,
that borrowing levels are not currently too low in most countries. These constraints exist
because government borrowing must ultimately be funded by the taxpayer.
A number of Australian studies of early initiatives to promote private investment in
infrastructure concluded that, in most cases, the schemes being proposed were
inferior to the standard model of public procurement based on competitively tendered
construction of publicly owned assets (Economic Planning Advisory Commission
(EPAC) 1995a,b; House of Representatives Standing Committee on Communications
Transport and Microeconomic Reform 1997; Harris 1996; Industry Commission 1996;
One response to these negative findings was the development of formal procedures for
the assessment of PPPs in which the focus was on "value for money," rather than
reductions in debt. The underlying framework was one in which value for money was
achieved by an appropriate allocation of risk. These assessment procedures were
incorporated in the private finance initiative and its Australian counterparts from the late
1990s onwards.
In 2009, the New Zealand Treasury, in response to inquiries by the new National Party
government, released a report on PPP schemes that concluded that "there is little
reliable empirical evidence about the costs and benefits of PPPs" and that there "are
other ways of obtaining private sector finance", as well as that "the advantages of PPPs
must be weighed against the contractual complexities and rigidities they entail".
Nowadays, a new model is also being discussed, called the Public–Private Community
Partnership (PPCP) model, wherein both the government and private players work
together for social welfare, eliminating the prime focus of private players on profit. This
model is being applied more in developing nations such as India. Success is being
achieved through this model too. it mainly helps to ramp up the development process
as the focus is shifted towards target achievement rather than profit achievement.
Privatisation of water
After a wave of privatisation of many water services in the nineties of the previous
century, mostly in developing countries, experiences show that global water corporation
have not brought the promised improvements in public water utilities. Instead of lower
prices, large volumes of investment and connecting the poor to water and sanitation
water tariffs have increased out of reach of poor households. Water multinationals are
withdrawing from developing countries and the World Bank is reluctant to provide
The privatisation of the water services of the city of Paris was proven to be unwanted
and at the end of 2009 the city did not renew its contract with two of the French water
corporations. After one year of being controlled by the public the water tariff
has been cut by 5 to 10% 
Health Public-Private Partnerships
A health services PPP can be described as a long-term contract (typically 15 to 30
years) between a public-sector authority and one or more private sector companies
operating as a legal entity. The government provides the strength of its purchasing
power, outlines goals for an optimal health system, and empowers private enterprise to
innovate, build, maintain and/or manage delivery of agreed-upon services over the term
of the contract. The private sector receives payment for its services and assumes
substantial financial, technical and operational risk while benefiting from the upside
potential of shared cost savings.
The private entity is made up of any combination of participants who have a vested
interested in working together to provide core competencies in operations, technology,
funding and technical expertise. The opportunity for multi-sector market participants
includes hospital providers and physician groups, technology companies,
pharmaceutical and medical device companies, private health insurers, facilities
managers and construction firms. Funding sources could include banks, private equity
firms, philanthropists and pension fund managers.
For more than two decades public-private partnerships have been used to finance
health infrastructure. Now governments are increasingly looking to the PPP -model to
solve larger problems in health care delivery. There is not a country in the world where
health care is financed entirely by the government. While the provision of health is
widely recognized as the responsibility of government, private capital and expertise are
increasingly viewed as welcome sources to induce efficiency and innovation. As PPPs
move from financing infrastructure to managing care delivery, there is an opportunity to
reduce overall cost of health care.
Market Potential for Health PPPs
The larger scope of Health PPPs to manage and finance care delivery and
infrastructure means a much larger potential market for private organizations. Spending
on healthcare among the Organisation for Economic Cooperation and Development
(OECD) and BRIC nations of Brazil, Russia, India and China will grow by 51 percent
between 2010 and 2020, amounting to a cumulative total of more than $71 trillion.
Of this, $3.6 trillion is projected to be spent on health infrastructure and $68.1 trillion will
be spent on non-infrastructure health spending cumulatively over the next decade.
Annually, spending on health infrastructure among the OECD and BRIC nations will
increase to $397 billion by 2020, up from $263 billion in 2010. The larger market for
health PPPs will be in non-infrastructure spending, estimated to be more than $7.5
trillion annually, up from $5 trillion in 2010.
Health spending in the United States accounts for approximately half of all health
spending among OECD nations, but the biggest growth will be outside of the U.S.
According to PwC projections, the countries that are expected to have the highest health
spending growth between 2010 and 2020 are China, where health spending is
expected to increase by 166 percent, and India, which will see a 140 percent increase.
As health spending increases it is putting pressure on governments and spurring them
to look for private capital and expertise.
Product development partnerships
Product development partnerships (PDPs) are a class of public–private partnerships
that focus on pharmaceutical product development for diseases of the developing
world. These include preventive medicines such as vaccines and micro-bicides, as
well as treatments for otherwise neglected diseases. PDPs were first created in the
1990s to unite the public sector's commitment to international public goods for health
with industry's intellectual property, expertise in product development, and marketing.
International PDPs work to accelerate research and development of pharmaceutical
products for under-served populations that are not profitable for private companies.
They may also be involved in helping plan for access and availability of the products
they develop to those in need in their target populations. Publicly financed, with
intellectual property rights granted by pharmaceutical industry partners for specific
markets, PDPs are able to focus on their missions rather than concerns about
recouping development costs through the profitability of the products being developed.
These not-for-profit organizations bridge public- and private-sector interests, with a view
toward resolving the specific incentive and financial barriers to increased industry
involvement in the development of safe and effective pharmaceutical products.
International product development partnerships and public–private partnerships
partners with research institutes and private pharmaceutical companies to
develop faster-acting, novel treatments for tuberculosis that are affordable and
accessible to the developing world.
While some PPP projects have proceeded smoothly, others have been highly
controversial. Australian examples include the Airport Link, the Cross City Tunnel,
and the Sydney Harbour Tunnel, all in Sydney; the Southern Cross Station
redevelopment in [[MPartnerships BCelbourne]]; and the Robina hospital in
In India, public-private partnerships have been extremely successful in developing
infrastructure, particularly road assets under the National Highway Authority of India.
In Canada, public–private partnerships have become significant in both social and
infrastructure development. PPP Canada Inc. was created as a Crown corporation with
an independent Board of Directors reporting through the Minister of Finance to
Parliament. Its mandate is to improve the delivery of public infrastructure by achieving
better value, timeliness and accountability to taxpayers, through P3s. The Corporation
became operational in February 2009 with the appointments of a Chair of the Board of
Directors and a Chief Executive Officer.
PPPs exist in a variety of forms in British Columbia through the focused efforts of
Partnerships BC, a company registered under the Business Corporations Act, that is
wholly owned by the Province of British Columbia and reports to its shareholder the
Minister of Finance. Projects include the Canada Line rapid transit line, the Abbotsford
Hospital and Cancer Centre and run of river hydro-electric projects in Toba River. In
Quebec, a number of notable PPPs include the McGill University Health Centre, the new
western extension of Autoroute 30 and Université de Montréal's Hospital Research
In the UK, two-thirds of the London Underground PPP was taken back into public
control in July 2007 after only 4 and a half years at an estimated cost of £2 billion and
the remaining one-third was taken back into public control in May 2010 after 7 and a half
years for a purchase price of £310m. The Government had paid advisers £180m for
structuring, negotiating and implementing the PPP and had reimbursed £275m of bid
costs to the winning bidders.
The 30 year PPP contract for the refurbishment of the MOD Main Building in London
was estimated to give a saving of only £100,000 as compared to the £746.2m cost of
The refinancing of the Fazakerley Prison PFI contract following the completion of
construction delivered an 81% gain to the private sector operator.
The NATS PPP saw 51% of the UK's air traffic control service transferred to the private
sector, however following the decline in air traffic after the September 11 attacks, the
Government and BAA Limited each invested £65m in the private sector operator in 2003.
In Newfoundland Robert Gillespie Reid contracted to operate the railways for 50 years
from 1898, though originally they were to become his property at the end of the period.
See alsoEuropean PPP Expertise Centre
Global Development Alliance
Global Partnership Initiative
Global public-private partnership
Health Public-Private Partnerships
Public/social/private partnership (PSPP)
Public Works and Government Services Canada
Private participation in railway share
The Canadian Council for Public Private Partnerships
P3 Canada Inc.
References1.^ Moszoro M., Gasiorowski P. (2008), 'Optimal Capital Structure of
Public-Private Partnerships', IMF Working Paper 1/2008.
3.^ Public Private Partnerships in Europe.
4.^ PFI projects hit fresh low as few deals closed
5.^ Allen and Overy
6.^ European Commission Communication on PPP November 2009
7.^ European PPP Expertise Centre
8.^ "Brian Rudman: Promised electric trains derailed by misguided enthusiasm". The
New Zealand Herald. 1 June 2009. http://www.nzherald.co.nz/nz/news/article.cfm?
c_id=1&objectid=10575753. Retrieved 21 February 2010.
9.^ the Water Justice Project on Transnational Institute
10.^ Reversal of privatisation of Paris' water
11.^ Deputy Mayor of Paris Anne Le Strat tells how Paris put water services back into
12.^ article on CEO
13.^ Water tariff cut
14.^ a b c PricewaterhouseCoopers' Health Research Institute, (2010). [Build and
Beyond: The (r)evolution of healthcare PPPs] http://www.pwc.com/us/ppphealth, p9.
15.^ Moore, Matthew, "Open Secrets", Sydney Morning Herald, 31 October 2005.
Accessed 7 January 2007.
16.^ An Introduction to Public Private Partnerships
17.^ "Tube maintenance back 'in house' as new deal is signed". BBC News. 8 May
2010. http://news.bbc.co.uk/1/hi/england/london/8669823.stm. Retrieved 10 May 2010.
18.^ "London Underground PPP: Were they good deals?". National Audit Office. 17 June
19.^ "Ministry of Defence: Redevelopment of MOD Main Building". National Audit Office.
18 April 2002. http://www.nao.org.
20.^ "The Refinancing of the Fazakerley PFI Prison Contract". National Audit Office. 29
June 2000. http://www.nao.org.uk/publications/9900/the_refinancing_of_the_fazaker.
21.^ "Refinancing the Public Private Partnership for National Air Traffic Services".
National Audit Office. 7 January 2004. http://www.nao.org.
 Further readingBurnett, M. "PPP - A decision maker's guide", European Institute of
Public Administration, 2007
Chinchilla, C. "El nuevo contrato de colaboración entre el setor público y el sector
privado", Revista Española de Derecho Administrativo nº 132 (2006)
Gonzalez Garcia, J. "El contrato de colaboración público privada", Revista de
Administración Pública, nº 170 (2006).
Linotte Didier, Un cadre juridique désormais sécurisé pour les contrats de partenariat,
AJDA, n° 1/2005 du 10 janvier 2005.
Monera Frédéric, Les financements innovants de services et de projets publics, Revue
de la Recherche Juridique – Droit prospectif, PUAM, 2005-1, p. 337 & s.
Moszoro M., Gasiorowski P. (2008), 'Optimal Capital Structure of Public-Private
Partnerships', IMF Working Paper 1/2008. 
Colman, J. (2002), ‘Mumbo jumbo…and other pitfalls:Evaluating PFI/PPP projects’,
National Audit Office PFI / PPP Conference "Bringing about beneficial change, London,
Economic Planning Advisory Commission (EPAC) (1995), ‘Final Report of the Private
Infrastructure Task Force’, Australian Government Publishing Service, Canberra.
Economic Planning Advisory Commission (EPAC) (1995), ‘Interim Report of the Private
Infrastructure Task Force’, Australian Government Publishing Service, Canberra.
Harris, A.C. (1996), ‘Financing infrastructure: private profits from public losses’, Audit
Office of NSW, Public Accounts Committee, Parliament of NSW, Conference,
Public/Private infrastructure financing: Still feasible?, Sydney, September.
House of Representatives Standing Committee on Communications Transport and
Microeconomic Reform, (1997), ‘Planning not Patching: An Inquiry Into Federal Road
Funding’, The Parliament of the Commonwealth of Australia, Australian Government
Publishing Service, Canberra.
Industry Commission (1996), ‘Competitive Tendering and Contracting by Public Sector
Agencies’, Australian Government Publishing Service, Canberra.
Minnow, Martha and Jody Freeman (2009), Government By Contract: Outsourcing and
American Democracy, Harvard U.P.
Möric, K. (2009), 'Les partenariats public-privé - le choix du partenaire privé au regard
du droit communautaire, Editions Larcier, 264 p.
Quiggin, J. (1996), ‘Private sector involvement in infrastructure projects’, Australian
Economic Review, 1st quarter, 51–64.
Spackman, M. (2002), ‘Public-private partnerships: lessons from the British approach’,
Economic Systems, 26(3), 283–301.
Strauch, L. (2009), ‘Public Private Partnership in European Road Infrastructure: PPP as
Investment Asset Following the M6 Road Project in Hungary’,VDM.
Monbiot, G. (2000), ‘Captive State, The Corporate Takeover of Britain’, Macmillan.
Venkat Raman, A. and JW Bjorkman (2009), 'Public Private Partnerships in Health Care
in India: Lessons for Developing Countries'. London. Routledge.
PwC Health Research Institute (2010), 'Build and beyond: The (r)evolution of healthcare
External links United Nations Foundation & Vodafone Foundation Technology
European PPP Expertise Centre
PPP in Infrastructure Resource Center for Contracts, Laws and Regulation
Private Participation in Infrastructure database
A Primer on Public-Private Partnerships
Canadian Union of Public Employees on P3s
What are Public Private Partnerships? BBC News
CEE Bankwatch PPP study - Never mind the balance sheet - the dangers posed by
public-private partnerships in central and eastern Europe
Public Private Partnership in the Provision of Health Care Services to the Poor
D+C article 09/2010: Green for Growth Fund Southeast Europe by KfW
Entwicklungsbank and the European Investment Bank
Build and Beyond: The (r)evolution of healthcare PPPs
Public-Private Partnership in Uzbekistan: Problems, Opportunities and Ways of
IFC Advisory Services in Public-Private Partnerships
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|51. PPP Public Private
(Overview and references)
This program is oriented towards Professionals & Managers entrusted with
Privatization Project Visualizing, Feasibility Analysis, Formulating Project, Strategy
Development, Proposal Preparation & Evaluation, Agreement Terms, Implementation
The program provides a clear understanding of the Issues at each stage and the
good and best practices to be followed.
Program will follow the process approach – so you can directly implement in your
work what is discussed and check-listed during the program.
This Program is intended for…
The program is directed at Government, Regulatory Organizations, Owners, Financing
Agencies and Operators.
Who should attend: Government Departments, Development Agencies, Infrastructure
Developers, Investment Banks, Private Equity Funds, Infrastructure Funds,
Construction Companies, Investment Authorities, Law Firms and Consulting Firms.
1. Understanding the Logic of PPP
2. Public Partnership Projects – the Happy Stories
3. Public Private Projects - Disasters
4. The Legal & Regulatory Issues
5. The Political & Social Issues
6. Economic Aspects & Project Attractiveness Issues
7. Visualizing PPP Projects
8. Feasibility Analysis of PPP Proposals
9. Formulating PPP Projects
10. PPP Strategy Development
11. PPP Project Proposal Preparation & Evaluation
12. Bid Processes and Transaction Documents