A public private partnership (3Ps) is a government and one or more private sector companies. 3Ps involves a contract between public sector authority and a private party provides a public service or project and assumes substantial financial, technical and operational risk in the project.
Management of Public Private Partnership Contract.
3Ps contracts are essentially concessionary contracts including financing by investor when the owner has limited budget or borrowing capacity.
The 4 principle roles for the private sector in PPP schemes include:
1) To provide additional capital.
2) To provide alternative management and implementation skills.
3) To add value to the consumer and the public at large.
4) To provide better identification of needs and optional use of resources.
When to adopt PPP contracts.
PPP schemes have developed in part due to financial shortages in the public sector. They are used mainly:
- For revenue earning projects e.g. to toll roads, power, water, transport, health, and education.
- Where the proposed tariff is an attraction to the investor and offers value for money to the public.
Criteria used in the formation of PPP contracts.
1. The proposed tariff, (revenue to investor) is a major consideration in the bid evaluation.
2. The project should be economically viable for the public sector.
3. The project should be economically viable for the public sector.
4. Appropriate balance for risk and award between the public and private sector.
5. Public sector must achieve value for money.
Advantages of PPP Contracts.
1. Brings in resources and expertise from the private sector.\
2. Improved value for money in the procurement of public service through competition.
3. Improved operational and commercial performance.
4. Cost and risk shared by investor.
5. Acceleration of infrastructure provision.
6. Easter implementation.
7. Improved quality of service.
8. Generation of additional revenues.
9. Enhanced public management.
Disadvantages of PPP contracts.
1. Contracts are complex and tendering process have long lead times.
2. Effective contract management and performance monitoring systems are required.
3. It may not be politically acceptable.
4. It locks public sector into long time private sector financing and commitments.
5. Possible conflict between planning and environmental consideration cost of re-entering the business of the operator.