Public-Private Partnership (PPP) Contract Models

Public-Private Partnership (PPP) Contract Models by SN Panigrahi

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Public Private Partnership (PPP) is a funding models for a public infrastructure project like a new telecommunication system; airport/ sea port; power plants; roads; bridge; infrastructure projects etc. Notably, here –
• Public partner is represented by the Government at a local or state or national level; and
• Private partner can be privately owned business; public corporation; consortium of business with a specific area of expertise.

PPP arrangements are useful for large projects that require highly skilled workers and a significant cash outlay to get started. PPP model provides well defined allocation of risk between private sector and public sector.

Characteristics of PPP model are highlighted hereunder –
• The public entity should have the enabling authority to transfer its responsibility; enabling legislative and policy framework, administrative order.
• There is usually a significant transfer of responsibility to the private entity.
• During the operational life of the project, the public sector’s role is to monitor the performance of the private partner to enforce the terms of contract.
• Public sector payments are based on performance standards set out in the contract. Whereas, the private sector payments are conditionally based on achieving the pre-specified levels of performance.

Advantages of PPP model are highlighted hereunder –
• To enable private investment flows.
• To deliver efficiency gains and enhanced impact of the investments from using the private sector skills and from transferring risk to the private sector.
• To increase transparency.
• To efficiently use the resources, availability of modern technology, better project design and implementation, etc.
• Enabling faster implementation, reduced lifecycle costs and operational costs and optimal risk allocation.

Types of PPP models –
• Design-build;
• Operation & management contract;
• Design-Build-Finance;
• Design-Build-Finance-Operate;
• Design-Build-Finance-Manage;
• Design Build Operate;
• Build Own Operate;
• Build Operate Transfer;
• Build Own Operate Transfer;
• Buy-Build-Operate;
• Build Lease Transfer;
• Build Lease Operate Transfer;
• Lease Renovate Operate Transfer;
• Design Construct Manage Finance;
• Operation License;
• Only Finance.

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