A public service remains a public service
Irrespective of the management model, public services are tightly regulated by the public authority. Under a contract signed with a private partner, the public authority retains ownership of the structures, defines the scope of the public service, sets the performance objectives, verifies the efficiency of the service provided and validates the price of the service. All of this is set out by the public authority in the specifications and must be complied with by the private operator.
The public service does not become a private service!
The capital structure of a concession company (whether public or private ownership, or a mixture of the two) has no impact on the service provided by that company. The service remains a public service. Around 10 years ago, for example, the French government privatised the motorway concession companies. However, those companies remain responsible for the public service assigned to them, and framed by the concession contract that ties each of them to the concession grantor, i.e. the French government. The latter still owns the motorway infrastructure. It sets the objectives, defines toll prices and their increases, and verifies the service provided by the concession companies. The infrastructure, financed by the concessionaire, is returned to the public authority at the end of the concession.
Under a PPP, the public authority retains control
The public authority retains ownership of the structures and defines the scope of the public service.
The public authority does not give free rein to the private operator but decides what that operator is to do
Under a PPP, the public authority decides what is to be done; it does not give free rein to the private operator.
The public authority remains responsible for the public service and sets the rules governing how it is to be performed. It only transfers the risks associated with the financing, construction and operation of the infrastructure, and the execution of those missions.
If the private operator fails to comply with its commitments, the public authority takes remedial action.
The private partner acts under the control of the public authority, and is accountable to that authority at all times through technical and financial reports, as well as through the submission of a detailed annual activity report. Sanctions are taken in the event it fails to comply with its contractual obligations.
Example: under motorway concession contracts
The specifications define in detail the investments to be made, as well as around 20 performance indicators, including waiting time at the toll plaza and road surface maintenance. (source: ASFA).
- Everyone has an opinion but who know exactly what a PPP is?
- Why assign the management of public infrastructure to the private sector?
- Critics: PPPs bring no benefits
- Critics: PPPs are expensive
- Critics: PPPs are a threat to SMEs
- Critics: PPPs are a “time bomb” for public finances
- Critics: the private sector only takes a short-term view
- Critics: the PPP financing method is totally incomprehensible
- Critics: PPPs sometimes have a bad image
- PPPs: a French model applied only in France?