Partnerships between a government body and a private sector party whereby the private sector provides infrastructure or services that have traditionally been delivered by the public sector are termed as Public Private Partnerships (PPPs). PPPs come in different forms. A few of them are mentioned below. The level of ownership, financial responsibility and required know-how may vary across the different models. PPPs are widely used in Europe for improving the efficiency and effectiveness of local public service delivery and are usually based on the following one or more basic concepts:

Operate:  

A private entity operates the facility for an agreed compensation while the responsibility of the capital costs remains with the local public authority.

Lease/Purchase and Operate:  

The facility is leased for certain number of years or purchased by the private entity from the local authority. The private entity then operates the facility and charges user fees.

Lease/Purchase, Build and Operate:  

In this arrangement the leased/purchased facility is built/refurbished or further expanded and operated charging user fees by the private entity. 

Build:  

The private entity is contracted to build/refurbish/expand the facility according to specifications of the local authority for a certain agreed compensation and handed over to the public sector on completion. 

Build, Operate, Transfer (BOT): 

A private entity is responsible to build and operate the facility for a specified period and then the facility is transferred to the local authority.

Build and Operate:  

A private entity builds and operates the facility and is responsible for its capital financing. The local public authority is responsible to regulate and control its operations.

Build and Transfer:  

The private entity builds the facility and then transfers ownership to the local authority. (UN-HABITAT, 2009) 

EXAMPLES OF PPP STRUCTURES

PPP - Sell to a private partner and lease back 

In this model infrastructure is sold under the condition that it will upgrade, meet better operation integration and incorporate better management techniques. The municipality then leases the infrastructure back from the private contractor for a certain fixed charge over a stipulated duration. With this practice, it reveals that the infrastructure changes the ownership rights from the contractor to the municipality at the end of the leading contract. Ownership rights are generally transferred back to the municipality at the end of the leasing contract (Novikova et al., 2017).

Advantages:  This model presents numerous advantages. For instance, when infrastructure is leased, from the municipality to a private contractor and back again to the municipality after the end of the leasing period, the private contractor and their investors incur the investment costs. On the other hand, The municipality enjoys the benefits of having updated infrastructure without having to take on any further debt or incur any additional expenditures. Lastly, the risks that would be experienced from the finances and other related costs would be spread out over time.  

Disadvantages:  The risk associated with this model is that the partners of the private investors would share the risk after the leasing period. The hazards might be connected to the operation and maintenance of the asset. Additionally, the municipality loses some degree of control over the assets that are already under lease.

Projects that can be financed with this model:  Leasing provides support for initiatives that need substantial upfront investment expenses, as well as for projects that are too large for the municipality to handle by providing appropriate funds and other measures.

PPP - Concession to private partner