Public Private Partnerships (‘PPPs’) are partnerships between the public sector and the private sector for the purposes of designing, planning, financing, constructing and/or operating projects which would be regarded traditionally as falling within the remit of the public sector. Infrastructure projects such as roads and bridges are prime examples.A PPP can be viewed also as a means of delivering a service and not merely an asset enabling the service to be delivered. A key objective of a PPP is to allocate risk to the person best placed to manage and deal with the particular risk. Certain risks may be more effectively managed by the private sector rather than the public sector.The private sector has always been involved in the water sector in some form or other, from tendering for construction contracts in large urban supplies to the informal provision of vended water in unserved areas. However, a new role is currently being negotiated globally. Three terms have been used (often interchangeably) to describe this new role.PPP is carried out by institutions which have elements of both public and private involvement. The two main methods of operation are:Â Contract TypeDescriptionExamplesCooperativesThey can position themselves to be the service providers for certain (often poorer, informal) areas of a city and manage facilities in these areas. Often used in rural areas, in conjunction with NGO’s.Port-au-Prince, Haiti; Orangi, PakistanService ContractsPublic authority retains overall responsibility for the operation and maintenance (O&M) of the system, and contracts out specific components. Service contracts last 1-3 years and include services such as meter reading, billing and maintenance.Mexico City; Santiago, Chile; Madras, IndiaManagement ContractsPublic authority transfers responsibility for the management of a full range of activities within a specific field, such as O&M. Remuneration is based on key performance indicators. Public authority typically finances working and investment capital and determines cost recovery policy. Usually contracts last between three and five years.Cartagena, Colombia; Gdansk, Poland; Mali; Johannesburg, South AfricaLease ContractsPrivate operator rents the facilities from a public authority and is responsible for O&M of the complete system and tariff collection. Lessor effectively buys the right to the revenue stream and thus shares significant commercial risks. Usually 5-15 years.Cote d’Ivoire; Guinea; Czech RepublicBOT (Build Operate, Transfer)Usually used to procure large discreet items of infrastructure e.g. water treatment plants that require significant finance. The private operator is required to finance, construct, O&M the facility for a specific period of time (usually more than 20 years) before transferring the facility back to the public authority. Variations: BOOT (Build, Own, Operate, Transfer) and BOO (Build, Own, Operate).Mendoza, Argentina; Izmit, TurkeyConcessionsPrivate operator takes responsibility for O&M and investment; ownership of assets still rests with the public authority. Concessions are substantial in scope (usually a whole city or region) and tenders are usually bid on the tariff 25 – 30 years.Buenos Aires, Argentina; Manilla, Philippines; Cancun, MexicoDivestitureFull private ownership and responsibility under a regulatory regime.England and WhalesAdapted from Webster & Sansom, 1999Note the distinction between responsibility for ownership of the assets and management of the provision of services.Adapted from Webster & Sansom, 1999.Source: PPI Database, 1998
