Box 1.20 provides a summary of the main recommendations regarding PPPs as potential options to procure public Infrastructure.

a) The Challenge of the Availability of Long-Term Finance

Private finance PPPs require long-term finance, the majority of which should be in the form of debt so as to maximize financial efficiency through gearing[51] (see section 7).

The preceding sections explained how the PPP option may be a significant source of incremental efficiency and provide other benefits for better infrastructure management. It may also have weak points and other issues that make it inappropriate for some of projects.

Governments need to protect and maximize the potential benefits of the PPP tool and mitigate its potential risks and pitfalls. Otherwise, PPPs will create undue burdens to taxpayers rather than increase efficiency and reliability in public works and service delivery.

In addition to offering benefits and advantages, PPPs are also a procurement option, however, one that has weak spots and potential disadvantages.

PPPs can also deliver additional efficiency benefits as follows:

The other main motivation for the use of PPPs as an alternative tool to both finance and procure infrastructure is the potential long-term gain in terms of efficiency (when applying PPP to the right projects and under the right structure and procurement process) and effectiveness (when using PPPs for achieving the desired outcomes in a time and cost effective way).

The financial motivation may be divided into two subgroups. One relates to the statistical and national accounting perspective (private financing that may be regarded as “off balance sheet” of the government, which constitutes a dangerous bias in favor of PPPs). This should be differentiated from the pure cash motivation, that is, the access to external resources to tackle a funding shortage for infrastructure development, regardless of whether or not this is considered, in the respective accounting system, as public debt (explained in 5.1.2.).

There are a variety of reasons commonly given for using PPPs as an option to procure infrastructure. These reasons may be classified according to three main groups:

This section explains further the concept of infrastructure and public assets. It provides examples of infrastructure types that are usually developed under PPP schemes.

Public Assets and Infrastructure

This PPP Certification Guide is about procuring public tangible assets using a PPP process. Public assets are fixed assets (that is, assets purchased for long-term use) that are subject or dedicated to public use or concomitant to the provision of a public service.

A single type of PPP may be given different names in different sectors or countries, despite the scope of the contract and the features being the same. This difference is often due to variations in legal tradition and legislation, but may also relate to variations in common or standard language.