PUBLIC PRIVATE PARTNERSHIP (PPP)

 DEFINITION: Public Private Partnership is a contractual arrangement made

between the public and private sector to share their skills and resources in common to
serve the needs of general public. In this type of contract, both the risk and potential
of the resources is shared by public and private sectors.

 FUNCTIONAL OPERATION: The functional operation of a public private

partnership is that a public sector firm enters into a private sector or entity with
arrangement made for design, planning, construction and operation (on going) phases
of a project. The substantial life of a project is regarded as the term in which the public
sector pays for the use of an asset within a time period of 15 to 35 years. The main
difference between public private partnership and other procurement methods is that
the risk associated with the construction and operation phase of the project completely
lies with the private sector. The best example to demonstrate a public private
partnership is a hospital which is designed and constructed by a private sector
company and handed over to public sector to run as a state government public hospital
for general public use.

 CONTRACTUAL OPERATIONS: The private firm undertakes the contract under

a fixed time period and a budget or a tender, and it hires sub-contractors for
construction and operation activities of the asset. The asset will be under the
ownership of private firm until the completion of substantial period thereby after the
completion of the decided substantial period, the asset will be handed over to the
public sector which decides either to keep the use of asset for free public use or it
charges a nominal fee.

 VARIANCE AND TYPES:

 BOT – Build, Operate and Transfer.
 BOOT – Build, Own, Operate and Transfer.
The main difference between the two variances BOT and BOOT is that, in case of
BOT there is no ownership given to the private entity and the only work to be done is
to carry out design, building and operation followed to transfer of the assets to the
public sector, Where as in the case of BOOT, ownership is given for a specific period
of time which is referred as substantial period.
 ADVANTAGES AND DISADVANTAGES:
The expertise, skills and competency of private sector is utilised in PPP and the assets
are for long term operation and remuneration. Risk management costs are effectively
distributed in between public and private sectors. Projects are complete within the
timescale and quality is ensured.
Assets delivered are comparatively most expensive when compared with other
procurement methods. The assets to be delivered in the restricted timescale
irrespective of the events that can lead to inflexibility in the project schedule.