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Public-private partnerships: a clear benefit for public services

#airports
#motorways
#infrastructure

A public-private partnership, or PPP, is a contract under the terms of which a public entity partners with a private contractor to provide the financing, design, construction, renovation or operation and maintenance of infrastructures and facilities that contribute to public service delivery1. Used worldwide for large-scale projects, the nature of this type of contract is sometimes misunderstood. So what are their benefits and drawbacks, and which types of projects are they best suited to?

How do PPPs work? 

Although terms and conditions inevitably vary from country to country, PPPs are essentially cooperation agreements between public and private operators for the development and delivery of public-sector projects. Local authorities and/or national governments may make use of these partnerships to build roads, hospitals, power stations or many other types of infrastructure. They are typically long-term agreements averaging between twenty and thirty years, depending mainly on the payback period for the investment or financing terms and conditions adopted2.

Depending on the type of agreement, the investment costs and operational risks are borne either by the public partner or by the private partner, or shared between the two. So under the terms of a concession agreement, the public authority (the granting authority) engages the private operator (the concession operator) to design, finance, construct and accept thecommercial risks associated with the concession project (e.g. the risk of reduced traffic volumes)3. Several options are available under the terms of a partnership agreement (or contract): the investment costs and operational risks may be borne by the public partner (management agreement), but they may equally be shared between the parties or borne entirely by the private partner4.

Under concession agreements, remuneration is always provided by users, whereas for partnership agreements, it usually takes the form of a fixed fee set by the public partner5.

Concessions and partnership agreements: how do they work?

 

Airport concession agreements grant the concession operator full responsibility for airport operation, investment (in construction, refurbishment and expansion), personnel management and relationships with airlines and retail outlets, as well as infrastructure maintenance. In return, it receives revenue generated by airport operations and, in many cases, pays a fee to the public authority granting the concession. However, concessions do not come without risks, including weather-related risks. For example, Kansai International Airport in Japan (a member of the VINCI Airports network subsidiary of VINCI Concessions) is at risk from the typhoons and earthquakes common in this region. These risks are borne by the concession-holding company, which mitigates them on the basis of a dedicated adaptation and investment plan.

But regardless of the type of agreement, the public partner always retains ownership of the finished structures. The private operator must also comply with a range of mandatory obligations and submit regular technical and financial reports6.

Why use a PPP?  

Confronted by the need to balance government budgetary constraints with the continued investment in infrastructures necessary for economic development, many countries are turning to private funding. PPPs are one way of securing the required level of investment more quickly without the associated risks being borne by public services or taxpayers, since they remain the responsibility of the private company7.

Public authorities calculate the overall total costs, which are then spread over the full period of the agreement; an undeniable advantage from the standpoint of cash flow management. Private companies also benefit by being able to estimate their potential long-term revenue stream.

Public-private partnership and concession models facilitate long-term investment that benefits communities around the world, without imposing further on already stressed public finances.

They also leverage the expertise and investment capabilities of private stakeholders in ways that serve the public, whilst enabling the associated risks to be distributed optimally between the partners.

Public stakeholders can therefore focus on essential expenditure (health, education, defence, etc.) in the knowledge that they can rely on private partners with the ability to invest in infrastructures requiring significant inputs of capital.

The long-term commitment covering up to several decades provides significant reassurance for regions and localities. At the same time, it enables structural long-term investment that remains immune to electoral cycles and/or annual budgetary constraints, as well as ensuring the ongoing maintenance and renewal of infrastructures.

Our major rail, power and water infrastructure networks have been built using this public-private partnership model.

Pierre Anjolras, Chief Executive Officer of VINCI.

Dispelling some common misconceptions

The complexity of PPP8 agreements leads to them often being misunderstood or even criticised. Many objections are raised around the overall long-term cost to the public stakeholder, and the revenue received by private companies. However, it is the public partner that selects the service provider on the basis of a competitive tendering process. This competition ensures that the outcome is a high-quality service provided at the best-possible cost9.

Another common cause of concern focuses on the charges, such as motorway tolls, which are paid by users and set by central government under the terms of the agreement10. Concession holders accept very significant levels of risk as parties to these agreements: events such as the Covid-19 pandemic or the rise in materials and energy costs as a result of the war in Ukraine cannot be foreseen. It is also clear that the challenges posed by the energy transition require such substantial levels of investment that private investment and public-private partnerships will be essential in the near future11.

PPP contracts also involve SMEs

 

Although they are often awarded to major corporates with the required level of financial muscle, private contractors are required by the French law to award at least 20% of the estimated value of PPP projects to SMEs or specialist artisan subcontractors12. And, although this applies to only a minority of projects, some PPPs have been awarded directly to SMEs or consortia of smaller companies.

Is the ‘user pays’ principle fair?

 

All public services cost money. A tax-based or a user charging system could be used to pay for them. Since such services are funded solely through taxation, they appear to be free to users, but in reality, it is the taxpayer who is footing the bill. The ‘user-pays’ principle requires users to meet all or most of the cost involved in providing the service concerned. For example, the tolls charged on French motorways cover the full cost of the network, its maintenance and upgrading, and 37% of all toll-generated revenue is paid to the State in the form of taxes and duties13. This system can therefore be regarded as fairer, since it is the users of the service who pay for it.

Could the PPP model be extended to new applications?  

Historically, PPP contracts have existed in France since the Ancien Régime (under which France was ruled from the end of the 16th century until the revolution in 1789). We have them to thank for major infrastructure legacy projects, such as the Canal du Midi and the Paris Metro14. Widely employed today for transport infrastructures, and particularly motorways, they are most commonly used for the construction or refurbishment of public service facilities.

The concession model remains very active today. We can see that clearly in the increasingly widespread use of the concession model in Latin America and Central and Eastern Europe, as well as in India, because it facilitates economic growth and social development, helps mitigate project delays and facilitates ambitious new projects.

Nicolas Notebaert, Chief Executive Officer of Concessions at VINCI.

The SEA Tours–Bordeaux high-speed rail link was the first French high-speed rail project in France to be funded under a PPP. Since it came into service in 2017, the SEA high-speed rail link has carried more than 170 million passengers, including 23 million in 2025, and achieved a punctuality rate of above 99%. By encouraging the use of rail instead of road transport, it is also on track to reduce CO2 emissions by 7.5 million tonnes by 2050; an annual volume equivalent to a French town with a population of 700,000.

As the world’s No. 1 private airport operator, a leading operator of motorway concessions in France and internationally, and the lead shareholder in the SEA HSL, VINCI Concessions is a major force and a success story in the rollout of these infrastructure finance models.

The energy sector in general, and energy transition projects in particular, may also provide new opportunities for PPP projects. VINCI Chief Executive Officer Pierre Anjolras has referred directly to the Group’s desire to contribute to the development of a new generation of French nuclear power plants under the terms of a PPP agreement15.

A PPP-funded power transmission project

 

In April 2025, the Acerez consortium of VINCI subsidiary Cobra IS, Acciona and the Australian electricity distributor Endeavour Energy signed Australia’s first PPP agreement for power transmission16. The ultimate aim of the agreement is to connect a further 4.5 GW in generating capacity to the country’s power grid by 2028. The completed project will supply no fewer than two million households. PPP is also gaining ground in Brazil: “The PPP model is more central than ever. It's now the model of choice for most of the country’s high-voltage grid expansion projects, delivering sustained growth in power generation and transmission at a level that would have been impossible without private sector involvement”, explains German Sanchez González, CEO of Cobra IS subsidiary Cymi Brasil.

The PPP model allows public authorities to focus on other budgetary priorities, without slowing or compromising the development of critical infrastructures. PPPs also promote competition and innovation, because private companies must demonstrate the technical capabilities and international experience they can leverage to ensure early completion of these complex projects.

Marta Pérez, Head of Concessions at Cobra IS subsidiary Grupo Cobra.

Faster construction of high-quality infrastructures, investment spread more evenly over the long term, better management of costs and lead times, access to the latest innovations, risk management devolved to the private operator... There are many benefits to PPPs. Experience continues to show that agreements of this type effectively facilitate the construction and upgrading of public services. Following in the footsteps of transport and construction, sectors like energy are now beginning to adopt this contractual arrangement. Public-private partnerships have a bright future, not least as we face up to delivering the global energy transition.

Sources :

1 Banque de France : ‘Intermediated financing. Public-Private Partnerships (PPP)’ – https://www.banque-france.fr/system/files/2024-04/823415%20Fiche-419.pdf 

2 Ibid (page 4). 

3 VINCI : ‘Everything you always wanted to know about PPPs’  – https://www.vinci.com/sites/default/files/medias/file/2024/05/ppp-fr.pdf  

4 Banque de France : ‘Intermediated financing’. Public-private partnerships (PPP)’  (pages 3-4) – https://www.banque-france.fr/system/files/2024-04/823415%20Fiche-419.pdf 

5 VINCI : ‘Everything you always wanted to know about PPPs’ –https://www.vinci.com/sites/default/files/medias/file/2024/05/ppp-fr.pdf 

6 VINCI : ‘Public-Private Partnerships: answers to all your questions’ – https://www.vinci.com/en/newsroom/dossiers/public-private-partnershipshttps://www.vinci.com/en/newsroom/dossiers/public-private-partnerships 

7 World Bank Group : ‘PPP Benefits and Risks’ – https://ppp.worldbank.org/avantages-et-risques-des-ppp  

8 Vie publique : ‘What are Public-Private Partnerships?’ – https://www.vinci.com/en/newsroom/dossiers/public-private-partnershipshttps://www.vinci.com/en/newsroom/dossiers/public-private-partnerships

9 VINCI : ‘Public-Private Partnerships: answers to all your questions’ – https://www.vinci.com/en/newsroom/dossiers/public-private-partnerships  

10 French ministries of Ecological Transition, Regional Development, Transport, Urban Affairs and Housing: ‘French motorway tolls’ – https://www.ecologie.gouv.fr/politiques-publiques/peages-autoroutes-francaises 

11 Public Sénat: ‘Public-private partnerships: ‘According to the VINCI CEO: “We will have no other choice than to use this model" for the green transition’  – https://www.publicsenat.fr/actualites/economie/partenariats-publics-prives-on-naura-pas-dautre-choix-que-dutiliser-ce-modele-pour-la-transition-ecologique-selon-le-patron-de-vinci  

12 Légifrance : ‘Public Procurement Code’ – https://www.legifrance.gouv.fr/codes/article_lc/LEGIARTI000050930253  

13  ASFA : ‘The Toll’ – https://www.autoroutes.fr/FCKeditor/UserFiles/File/ASFA_Peage%202014.pdf 

14 VINCI : ‘Everything you always wanted to know about PPPs’ – https://www.vinci.com/sites/default/files/medias/file/2024/05/ppp-fr.pdf  

15Le Moniteur : ‘VINCI believes that the revival of nuclear power involves PPPs’  – https://www.lemoniteur.fr/article/pour-vinci-le-renouveau-du-nucleaire-doit-passer-par-les-ppp.2340700  

16 VINCI : ‘VINCI signs the first public-private partnership (PPP) contract for electricity transmission in Australia’ –. https://www.vinci.com/en/newsroom/press-releases/vinci-signs-first-public-private-partnership-ppp-contract-electricity 

 

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