Sample Material of Public Administration Study Kit (Paper - I)
Chapter IV - Organisations: Public - Private Partnerships
PUBLIC-PRIVATE PARTNERSHIP
(With Adaptation from www.pppinharyana.gov.in)
Public Private Partnership (PPP) is a contract between a pubic sector institution/ municipality and a private party, in which the private party assumes substantial financial, technical and operational risk in the design, financing, building and operation of a project. Traditionally, private sector participation has been limited to separate planning, design or construction contracts on a fee for services basis-based on the public agency’s spefications.
PPP Project means a project based a contract or concession agreement, between a government or statutory entity on the one side and a private sector company on the other side, for delivering an infrastructure services on a payment of use charges. Private Sector Company means a company in which 51% or more of the subscribed and paid up equity is owned can controlled by a private entity.
Why PPP:
- Delivery of quality services that provides Value for Money (VFM)
- New options for public sector finances (parallel vs. sequential development)
- Utilization of private sector expertise and efficiency in delivery of public services.
- Good Principle of PPP Risk transfer (who does what best)
- Performance standards and competition (payment upon delivery-output focus)
- Maintains value of public assets-whole-life.
What is not a PPP?
The way a PPP is defined in the regulation makes it clear that:
- A PPP is not a simple outsourcing of functions where substantial financial, technical and operational risk is retained by the instruction
- A PPP is not a donation by a private party for a public good
- A PPP is not the ‘commercialization’ of a public function by the creation of a stateowned enterprise.
- A PPP does not constitute borrowing by the state.