Striking the Right Balance in Public Private Partnerships

Public private partnerships, if properly structured, can be successful and meet the needs of all parties

Governments around the world are turning to private finance to deliver much-needed public infrastructure. Compared to other forms of project delivery, Public Private Partnership (PPP) projects are often characterized by a higher level of risk transfer from the public owner to the contractor. They offer governments the possibility of lower whole life costs and accelerated delivery while retaining ultimate ownership of public infrastructure projects. But while many PPP projects have been successful, some have failed or gone into bankruptcy.

Getting the balance right between the public and private sectors is therefore critical to the financial viability of the project. How should public agencies decide on where to allocate the risk, thereby creating sustainable conditions for collaboration? The key is to narrow down the procurement/delivery options during the planning phase and build a robust financial model for each to evaluate the right path for the project.

PPP has become a legitimate project delivery method in a number of countries around the world. It can provide greater certainty of project cost and contract value to the public sector before construction starts, maximize the use of private sector skills, and inject private sector capital into infrastructure.

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