BENEFITS OF USING PPP
- Increase funding for infrastructure: Public funds are freed for investments in sectors were private investment is impossible or inappropriate. PPPs are thus undertaken in addition to other forms of public sector investment and not in substitution for it.
- Introduce private sector efficiencies: Long-term contracts allow an improved planning and programming of the work by the contractor. The private sector has greater flexibility in adjusting its resources.
- Optimization of life cycle costs: In a well-designed PPP contract, both construction and rehabilitation maintenance tasks are considered over a long period. A private operator has greater budget flexibility (funds and timing of applying funds) to ensure that maintenance and rehabilitation are performed at the best time in the asset deterioration cycle. Government operates within the constraints of public funding availability and has less flexibility in applying funds across years of the asset cycle.
- Risk management: With proper risk identification and allocation, international experience shows that works performed under PPP contracts tend to meet cost predictions and deadlines better than conventional contracts.
- Innovation: The life cycle approach of PPP provides an incentive for contractors to define alternative solutions to meet performance requirements at lower cost and/or with higher efficiency. Innovation is facilitated by the prescription of output based operation and maintenance solutions available to the private party.
- Reduce risk for the public sector: The transfer of part of the project risks to private partners is one of the key incentives generated by public-private partnerships and directly results in a better control by the public sector of the overall project cost, delivery time frame and quality of outputs.
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