When considering PPPs it is important to recognise that there are different names and versions understood by governments around the world. Projects that are considered forms of PPP in some countries would not be thought of as such in others. For example, views of what a PPP is in the UK can vary from the definition of a PPP in France.
It is also important to recognise that different governments and sectors will have different experiences with PPPs; and while the Private Finance Initiative (PFI) is one of the most common forms of PPP among national and regional governments, partnerships are not exclusively based on the PFI model.
The PFI is a system for providing capital assets for the provision of public services. In the UK, this model is used for a large number of infrastructure projects, and provides strong incentives to deliver on time and on budget, while enabling governments to spread the cost of the investment over a 25 to 30-year period.2 Typically, the private sector designs, builds and maintains infrastructure and other capital assets and then operates those assets to sell services to the public sector. In most cases, the capital assets are accounted for on the balance sheet of the private sector operator.
Such differences in definition and understanding can make accessing the international experience difficult: in the UK, the PFI is simply one type of PPP, while in some countries and regions, the PFI is the only model and therefore the terms PPP and the PFI are synonymous.
Furthermore, governments will use PPPs in different sectors. In Australia, PPPs are used heavily in toll roads, whereas in the UK they are hardly used for this purpose. In the UK there are new models being developed: alliancing and incremental partnering for example. There are also more specific joint venture models in healthcare and education called Local Improvement Finance Trusts and Local Education Partnerships.
It must be noted that there are wide-ranging definitions of PPPs across the world and as already discussed the under-standing of these terms can vary considerably. However, it is possible to identify three broad frameworks in which these types lie. These include:
■ Design-Build-Finance-Transfer - The private sector finances and constructs the asset, which gives the private sector the incentive to complete on time and within budget. The asset is only paid for by the public sector when it has been completed
■ Design-Build-Finance-Maintain - The private sector is responsible for the design, build, finance and maintenance of an asset - this incentivises the private sector to design the building taking into account the long-term maintenance required. The focus is on the infrastructure and 'hard services' such as building maintenance
■ Design-Build-Finance-Operate - The private sector designs, builds and finances a new facility under a long-term contract and operates the asset during the term of the contract. The public sector purchases services that flow from the asset in this period and ownership is usually transferred back to the public sector at the end of the contract.
The extent of public private partnerships can vary from complete state control, ownership and delivery of all services to a fully privatised market. Exhibit 1 sets out the spectrum of PPP models that exists internationally.