What is a Public Private Partnership?

A PPP or public-private partnership is a collaboration between public bodies, such as central government or local authorities, and private companies to finance, build, and in some cases operate or maintain an infrastructure project such as a road, school or hospital.

Once the asset is built, it is maintained for usually between 20 and 30 years by the private sector contractor, after which it returns to public ownership.

In trying to bring the public and private sector together, supporters argue the management skills and financial awareness of private investors will create better value for money for taxpayers.

PPPs are meant to transfer certain risks to the private sector, such as construction risk, which it is felt are better borne by the private contractors and are therefore able to reduce the costs to the public purse. However, opponents have questioned whether any risk is in reality transferred away from the public sector, and argue that using PPP has been a way for governments to hide spending off their balance sheets.

In the UK, the private finance initiative or PFI model was created in the early 1990s and many governments around the world have interpreted the delivery mechanism in line with their own legislation and infrastructure needs. PPP has been seen as a solution to the funding shortfall experienced by many Western governments since then.

As a result, PPPs are now used in more than half of the world's countries with PPP pipelines identified and new pilot projects considered every year.

The model is well-established for the construction of economic infrastructure such as roads, bridges and public transport systems but it is also used for social infrastructure such as schools, prisons and hospitals.

In countries such as Canada, Australia and parts of Western Europe, governments have embraced the PPP model and it is widely seen as first choice for large public projects which require significant investment and facility or cost management over the duration of the contract.