Page 63 - Industrial plants

when the concession assets revert to the government franchises, where a private sector partner takes on
grantor. Transfer may be at book value or no value and the responsibility for providing a public service
may occur earlier in the event of failure of the including maintaining, enhancing or constructing
concessionaire. the necessary infrastructure.
3. Selling government services into wider markets
and other partnership arrangements where private
Stages of a BOOT project sector expertise and finance are vital to exploit the
Build: commercial potential of government assets.
• Design
• Manage project implementation Generally, governments’ key objectives when
• Carry out procurement commissioning a PPP are:
• Finance A. To maximise value for money of providing a service
• Construct over a long time scale (25 to 30 years). Maximising
efficiency and innovation helps to achieve value for
Own: money
• Hold interest under concession B. To transfer maximum risk to the private sector
consistent with the governments’ economic policy
Operate: and status.
• Manage and operate facility
• Carry out maintenance
• Deliver products/service Why should public or state authorities consider
• Receive payment for product/service PPP?
There are a number of factors, relating to public sector
Transfer: cash constraints and the underlying principles of PPP,
• Hand over project in operating condition at end of which might cause governments to consider the
concession period introduction of a PPP.

a. Public sector cash constraints in many
The development of PPP countries, demand for new infrastructure projects
The concept of a PPP – Public Private Partnership has is growing in quality and quantity. In addition there
been adopted by various governments in recent years. is the rising pressure for funds to renew, maintain
Instead of the public-sector procuring a capital asset and operate the existing infrastructure. Competition
and providing a public service, the private sector create for such funding is often intense not just between
the asset through a single stand alone business infrastructure projects but also with the many other
(financed and operated by the private sector) and then demands on public sector finance. PPP permits
deliver a service to the public sector client, in return for the authorities to substantially reduce capital
payment linked to the service levels provided. expenditure and convert the infrastructure costs
into affordable operating expenditure spread over
Various governments in recent years an appropriate timescale.
have adopted the concept of a PPP –
Public Private Partnership b. Principles of PPP: PPP allows each partner to
concentrate on activities that best suit their
respective skills. For the public sector the key skill
There are three main categories is in developing policies on service needs and
of PPPs requirements, while for the private sector the key is
to deliver those services at the most efficient cost.
1. The introduction of the private sector ownership
into state-owned businesses, using the full range Key Benefits of PPPs
of possible structures (whether by flotation or the a. Infrastructure created through PPP can improve
introduction of a strategic partner) with sales of the quality and quantity of basic infrastructure
either a majority or a minority stake; such as water, energy supply, telecommunications
2. Arrangements where the public sector contracts and transport as well as being widely applied to
to purchase quality services on a long-term basis other public services such as hospitals, schools
so as to take advantage of private sector and prisons. The public have access to improved
management skills incentivised by having private services now, not years away when a government’s
finance at risk. This includes concessions and spending programme permits.

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