Government and business can create a win-win status by working on the concept of public private partnership. It is a legal binding among public and private sectors for the provision of assets and the recovery of services that allocates responsibilities and business risks among the various partners. Active involvement of government is seen throughout the project's life cycle and for the more commercial tasks the private sector is responsible throughout this binding. PPP is in different forms, with varying degrees of participation by public and private sectors to varying levels of risk. Risk transfer from the public to the private sector is a critical element of all PPPs. To add up the best capabilities of the public and private sectors for mutual benefit is the main goal.Different models of PPP in which Government & Businesses combines their efforts to create win-win situation
- Franchising: A public authority contracts in which private company is to manage existing facility.
- DBFO (design, build, finance, and operate): In this a private group designs facilities based on government's requirements. They builds the facility, finances the capital cost and operates their facilities.
- BOO (build, own, operate): In this public authority purchases services for set period (say 30 years) after which possession remains with private provider
- BOOT (build, own, operate, transfer): In this public authority purchases services for set period after which possession is returned to public authority
- BOLB (buy, own, lease back): In this private contractor build facilities which are leased back to public authority and they manage it.
- Benefits of PPP for government
PPP provides an opportunity to:
- Improve service delivery: By allowing public & private sectors to perform what they do best. Government's core competency is to set policy and serve the public. It is better positioned to do that when the private sector takes responsibility for non-core functions such as operating and maintaining buildings.
- Improve cost-effectiveness. By taking advantage of private sector innovation, experience and flexibility, PPPs can often deliver services more cost-effectively than traditional approaches. The resulting savings can then be used to fund other needed services.
- Increase investment in public infrastructure. Investments in hospitals, schools, highways and other provincial assets have traditionally been funded by the governments and it increases debts. PPPs can reduce government's capital costs, helping to bridge the gap between the need for infrastructure and the government's financial capacity.
- Reduce public sector risk by transferring to the private partner those risks that can be better managed by the private partner. For example, a company that specializes in operating buildings may be better positioned than the government to manage risks associated with the changing demands of commercial real estate.
- Deliver capital projects faster, making use of the private partner's increased flexibility and access to resources.
- Improve budget certainty. Transferring risk to the private sector can reduce the potential for government cost overruns from unforeseen circumstances during project development or service delivery. Services are provided at a predictable cost, as set out in contract agreements.
- Make better use of assets. Private sector partners are motivated to use facilities fully, and to make the most of commercial opportunities to maximize returns on their investments. This can result in higher levels of service, greater accessibility, and reduced occupancy costs for the public sector.
PPP gives the private sector access to secure, long-term investment opportunities. Private partners can generate business with the relative certainty and security of a government contract. Payment is provided through a contracted fee for service or through the collection of user fees - and the revenue stream may be secure for as long as 50 years or more.