The guide to guidance : how to prepare, procure and deliver PPP projects

A public-private partnership ("PPP") arrangement differs from conventional public procurement in several respects. In a PPP arrangement the public and private sectors collaborate to deliver public infrastructure projects - such as roads, railways, airports - which typically share the following features: - a long-term contract between a public contracting authority (the "Authority") and a private sector company (the "PPP Company") based on the procurement of services, not assets; - the transfer of certain project risks to the private sector, notably with regard to designing, building, operating and/or financing the project; - a focus on the specification of project outputs rather than project inputs, taking account of the whole life cycle implications for the project; - the application of private financing (often "project finance") to underpin the risks transferred to the private sector; and - payments to the private sector which reflect the services delivered. The PPP Company may be paid either by users through user charges (e.g. motorway tolls), by the Authority (e.g. availability payments, shadow tolls) or by a combination of both (e.g. low user charges together with public operating subsidies). The rationale for using a PPP arrangement instead of conventional public procurement rests on the proposition that optimal risk sharing with the private partner delivers better "value for money" for the public sector and ultimately the end user. PPP arrangements are more complex than conventional public procurement. They require detailed project preparation and planning, proper management of the procurement phase to incentivise competition among bidders. They also require careful contract design to set service standards, allocate risks and reach an acceptable balance between commercial risks and returns. These features require skills in the public sector which are not typically called for in conventional procurement. This Guide to Guidance (the "Guide") seeks to identify the "best of breed" guidance currently available from PPP guidelines worldwide and selected professional publications. By providing a sourcebook of good PPP practice, it is designed to assist public officials responsible for launching and implementing PPP projects and to facilitate their understanding of the key issues and procedures involved in the procurement of PPP arrangements. The need for well-structured PPPs has never been greater. EU Member States and the European Commission have placed emphasis on the need to accelerate investment in infrastructure, by mobilising public and private sector finance through PPP arrangements as part of a strategy to address the economic downturn.