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Body of Knowledge:
PPP Introduction and Overview
This PPP Guide focuses on PPPs as a method for procuring infrastructure development and management on the basis of private finance, as introduced in box 1.3. The definition of a private finance PPP provided in this PPP Guide implies a number of features which need to be present in a PPP contract to...
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Body of Knowledge:
PPP Introduction and Overview
Important note: “Infrastructure” is used in this PPP Certification Guide in the broad sense. This includes not only complete systems or facilities with significant civil works, but also equipment (for example, rolling stock for rail) and plants (independent power producers, wastewater treatment...
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Body of Knowledge:
PPP Introduction and Overview
Traditional procurement of infrastructure: public finance and public management. Build and Design, and Build contracts.
Public works and public infrastructure are traditionally financed by the government. The source of funds for such traditional procurement is the public budget[11].
The public...
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Body of Knowledge:
PPP Introduction and Overview
Design, Build, Operate and Maintain (DBOM)
There are some contracts which are financed by the government against the budget (such as a conventional procurement) but in which the selected contractor will carry out the construction works, future operations, and maintenance....
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Body of Knowledge:
PPP Introduction and Overview
Contracts for the procurement of services or management of existing infrastructure can be divided into two categories.
“At-risk” long-term management or service contracts that can be regarded as PPPs (these are service PPPs, not DBFOM contracts); and
Contracts that are regarded as conventional O...
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Body of Knowledge:
PPP Introduction and Overview
Privatized Companies and Companies operating in a liberalized and regulated market — “Regulated Investor owned utilities”.
There is often confusion between privatization and PPPs (especially with user-pays PPPs). But there is a clear difference between these two forms of private sector engagement....
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Body of Knowledge:
PPP Introduction and Overview
This section provides information regarding the following:
Variations or types of PPPs; and
Nomenclature issues – explaining the various names that are used for contracts that may be regarded as PPPs.
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Body of Knowledge:
PPP Introduction and Overview
Previous sections have introduced the main variations and types of PPPs. The most relevant classification has been explained extensively, that is, user-pays versus government-pays PPPs. This and other variations and types of PPPs that consider other factors (ownership, scope, and so on) are shown...
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Body of Knowledge:
PPP Introduction and Overview
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....
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Body of Knowledge:
PPP Introduction and Overview
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....
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Body of Knowledge:
PPP Introduction and Overview
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:
Those related to the financial nature of PPPs, or PPPs as a financial mechanism for governments (including the “off balance sheet”...
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Body of Knowledge:
PPP Introduction and Overview
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...
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Body of Knowledge:
PPP Introduction and Overview
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...
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Body of Knowledge:
PPP Introduction and Overview
PPPs can also deliver additional efficiency benefits as follows:
PPPs ensure there is an up-front commitment of resources to maintenance and technical reliability: the private sector can improve the reliability of the infrastructure availability and quality by committing dedicated resources to the...
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Body of Knowledge:
PPP Introduction and Overview
In addition to offering benefits and advantages, PPPs are also a procurement option, however, one that has weak spots and potential disadvantages.
PPPs are significantly more complex than traditional procurement methods. Consequently, there is a significant risk in sinking resources into unworthy...
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Body of Knowledge:
PPP Introduction and Overview
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...
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Body of Knowledge:
PPP Introduction and Overview
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).
A sound financial structure requires that the debt is denominated...
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Body of Knowledge:
PPP Introduction and Overview
Box 1.20 provides a summary of the main recommendations regarding PPPs as potential options to procure public Infrastructure.
BOX 1.20: Dos and Don’ts
Do
Don’t
EMDEs, LDCs: Adapt the PPP strategy to your political, social and economic context under principles of realism and prudence...
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Body of Knowledge:
PPP Introduction and Overview
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Body of Knowledge:
PPP Introduction and Overview
This section explains further the basic structure of a private finance PPP, assuming the form (or the scope) of a DBFOM that was first introduced in section 4.
Figure 1.10 illustrates the basic structure of a common PPP (in which all of the equity in the SPV is provided by the private sector). This...
