Proponents of P3 argue that P3 successfully transfers risk from the public to the private sector and that the private sector is better managed of risk. As an example of successful risk transfer, they cite the case of the National Physics Laboratory. This deal eventually caused the collapse of the construction company Laser (a joint venture between Serco and John Laing), when the cost of the complex scientific laboratory that was eventually built was much higher than expected. [63] For more than two decades, public-private partnerships have been used to finance health infrastructure. In Canada, they represent 1/3 of all P3 projects nationally. [8] Governments have used the PPP model to address key health care issues. However, some healthcare PPPs have been shown to cost significantly more for development and maintenance than those developed under traditional public procurement. [79] Public-private partnerships are typically found in transportation and municipal or environmental infrastructure, as well as in public service housing. What`s wrong? A key challenge is that governments may not be fully exploiting the real benefits of engaging private sector stakeholders: their ability to assess, assess and manage certain types of risks. PPPs that do not transfer risk – and that benefit from the risk management capabilities of the private sector – may not meet expectations. Value for money assessment methods were integrated into PFI and its Australian and Canadian counterparts beginning in the late 1990s and early 2000s. [8]:The 2012 Chapter 4A study showed that value for money as an effective method of assessing PPP proposals was still insufficient.
[45] The problem is that it is not clear what the catchy phrase “value for money” means in practice and in technical detail. A Scottish accountant once called him a “technocratic hocus-pocus”. [8]:Chapter 4 Here`s how this misalignment often manifests itself when considering risk. A government agency asks a private developer to submit a bid for an upcoming project. As part of the offer, the developer takes into account all risks – construction risks, post-completion commercial risks and others. In addition to the baseline costs required to complete the project, the proponent adds a risk premium to cover the additional measures and activities required to mitigate and manage those risks. This includes additional checks, higher quality entries, more experienced project managers, and maybe even a financial bonus for the developer to avoid these risks. Typically, a private sector consortium forms a special company called a special purpose vehicle (SPV) to develop, build, maintain and operate the asset for the contractually agreed period. [30] [31] In cases where the government has invested in the project, it is usually (but not always) allocated an interest in the VPD. [32] The consortium usually consists of a contractor, a maintenance company and one or more equity investors.
The former are usually project shareholders who make decisions but are not repaid until debts are paid, while the latter are the project`s creditor. [8] The Global Public-Private Partnership (GPMV) is a governance mechanism to promote public-private partnership (PPP) between an international intergovernmental organization such as the United Nations and private companies. Existing PPPGs aim to improve access to essential medicines in developing countries and[85] promote handwashing with soap to reduce diarrhoea, among others. [86] It is the VPS that signs the contract with the government and with the subcontractors for the construction and maintenance of the plant. A typical example of a PPP would be a hospital building funded and constructed by a private developer and then leased to the hospital administration. The private developer then acts as the owner, providing housekeeping and other non-medical services, while the hospital itself provides medical services. [30] Investment in public sector infrastructure is seen as an important means of supporting economic activity, as highlighted in a European Commission Communication on PPPs. [71] Due to the important role that PPPs play in the development of public sector infrastructure, in addition to the complexity of these transactions, the European PPP Expertise Centre (EPEC) was established to support the capacity of the public sector to implement PPPs and exchange timely solutions to common problems. across Europe in PPP.
[72] Another model under consideration is the public-private partnership (PCSP), where government and private actors work together for social welfare, removing the private actors` main focus on profit.