Share price 12/12/2017 11:13
€86.720 +0.31 %

Public-Private Partnership

Critics: PPPs bring no benefits

It is up to the public authority to choose whether or not to adopt the PPP approach.

The five benefits of PPPs


Which has at least five benefits:

✚ Speed

The general public can benefit more rapidly from high-quality infrastructure or facilities that might never have seen the light of day without a PPP, or only much later, because it’s the private partner that finances the infrastructure or facilities..

✚ Costs earmaked and debt spread

The second benefit is financial but not for the reasons that spring immediately to mind. By spreading the investment over the long term (just like any individual does when signing a loan agreement to purchase a house or a contract to lease a vehicle with an option for purchasing), the PPP is a way for the public authority to relieve pressure on budgets in a period where the level of public debt is reducing considerably the authority’s margin for manoeuvre. However, and more importantly, the PPP enables the public authority to assign the construction and operation of a public facility to a single private operator and, by doing so, earmark the maintenance and management costs of the facility so that it is always fit for purpose. It is thus a tool for managing costs and guaranteeing maintenance over the life cycle of the infrastructure. At the end of the contract, the public authority recovers a facility in perfect working condition, while public buildings that are managed conventionally are often somewhat dilapidated.

✚ Overall optimisation (costs, delivery, sustainable development)

The PPP enables overall optimisation: in a “life cycle cost” approach, the low bidder wins the contract. It leads to a time saving for the public authority, with construction delivery targets met, a managed budget known in advance and better attention paid to sustainable development. Indeed, when the design and construction of a facility, as well as its management and operation over a long period, are assigned to a single private partner, it is in that partner’s interest to make the right decisions – from the outset – for achieving a better performance, particularly in terms of the environment, and planning easier and less costly maintenance.

✚ Innovation

By assigning the project to the private sector, the public authority benefits its private partner’s latest innovations and R&D throughout the contract. At the end of the contract, the public authority recovers a well-maintained facility that has benefited from those innovations.

✚ Risk transferred to the private partner’s expertise

The PPP enables the public authority to transfer risks to the people most able to manage them: technical risks associated with construction and operation, financial risks and usage or traffic risks.