The Public Private Partnership (PPP) is also known as PPP or 3P or P3 which involves two or more numbers of public and private sectors. This is a cooperative arrangement that is held for long – term period.
Here, one party forms the government or statutory entity and other one will be the private sector company. Construction undertaking developed based on a PPP on behalf of a concession agreement or on a contract between two parties forms the PPP undertakings. The contract is prepared for the delivery of infrastructure service on the payment of respective charges.
The main goal of PPP building projects is to combine and involve the capabilities from both the private and public sectors for the mutual benefit.
The main features of PPP construction projects are:
The different types of PPP construction projects are:
BOT is one of the most common privatization agreements. In this agreement, the government will hand over the constructing and operating rights to a private sector. Once the period is completed, this will be taken back by the government. This will be given for a pre – determined period of time.
One of the flexibility available in BOT is that the private sector can implement the planning and design as per the agreement. Some of the other types of BOT explained below like BOOT, BOO, DBOM, DBOT etc.
The government grants the right to finance, design, build, operate and maintain a project to a private entity, which retains ownership of the project. The private entity is not required to transfer the facility back to the government.
As the name tells, the government will hand over the project to the private sector entity to perform:
The operation of the undertaking completed must be performed for the specific period of time as stated in the agreement and must be finally transferred to the government. The transferring to the government or the partner is based on the previously agreed price or market price.
Along with the agreement, the government will state the responsibilities in order to perform the operation and the maintenance of the facility. In this undertaking agreement, a private partner is contracted by the government to design and build the facility based on the requirements performed by the government. DB is also called as Build – Transfer (BT).
The government sells the facility to the private business. The private business refurbishes and operates the facility.
A single contract is awarded to a private business which designs, builds, and operates the public facility, but the public retains legal ownership.
This model is similar to Design-Build except that the private sector also maintains the facility. The public sector retains responsibility for operations.
The private business buys the public facility, refurbishes it with its own resources, and then operates it through a government contract.
The facility is operated by the government. At the end of the agreed tenure, the undertaking is transferred to the government. The government grants the right to finance and build a undertaking which is then leased back to the government for an agreed term and fee.
As per the contract agreement involved in CAO, to an infrastructure facility, the project developer will expand the facility and rent it from the government. This is operated over a agreed period of time. This project may or may not be transferred back to the government by the project developer.
As per the contractual agreement for DOT, the private developer will be given favourable conditions to built the infrastructure project along with the right to develop the property adjoining the same. Hence, the private developer is allowed to enjoy the benefits that is created by the investment. The investment includes rents, property values.
In the case of ROT, the private sector is permitted to undergo the following activities on an existing facility,
These activities will be performed for a specific period of time after which the title will be transferred back to the government. ROT can be used to purchase the facility present abroad to undergo its refurbishment, erection etc. The consuming operation is done from the host country.
This type will turn over the existing facility to the private sector to perform the refurbishment. Till the time the franchise is not violated, the facility must be operated permanently. Once the work is complete, the operations can be performed by the private entity without any time limit or ownership.
This is given to undergo renovation and its operation for a specific time period. The operation is performed on the condition that the private facility will recover the cost that is agreed in return as per the contractual agreement along with the transferring of the entity back to the government. In this type, the existing infrastructure is handed over to a private facility for a particular time period.
After the completion of the facility, it is transferred to the public sector but the private sector will operate the facility for a specific period of time. In the case of DBO, the designing and building of the facility is done based on a turn-key basis. The DBO can be also referred to as Build Transfer Operate (BTO).
The contractual agreement under this criteria will enable the private sector to perform the following for a new facility
Once the lease time is over, the property is given back to the public sector. DBFO/M is a taken as a combination of BOO and BOOT in many countries. These activities are performed for a particular period of time or a long – term lease.
Following are the benefits involved in the participation of private sectors in public undertakings.