Public private partnerships are not the solution for the delivery of all services. There are risks in proceeding with public private partnerships without critically examining their suitability to specific circumstances. However, local government can realize important benefits when public private partnerships are used in the appropriate context.
Potential benefits include:
• Cost savings
With public private partnership, local government may be able to realize cost savings for both the construction of capital projects as well as the operation and maintenance of services. For example, construction cost savings can often be realized by combining design and construction in the same contract. The close interaction of designers and constructors in a team can result in more innovative and less costly designs. The design and construction activity can be carried out more efficiently, thereby decreasing the construction time and allowing the facility to be put to use more quickly. Overall costs for professional services can be reduced for inspections and contract management activities. As well, the risks of project overruns can be reduced by design-build contracts.
Cost savings can also be realized by local government in the operation and maintenance of facilities and service systems. Private partners may be able to reduce the cost of operating or maintaining facilities by applying economies of scale, innovative technologies, more flexible procurement and compensation arrangements, or by reducing overhead.
• Risk sharing
With public private partnership, local government can share the risks with a private partner. Risks could include cost overruns, inability to meet schedules for service delivery, difficulty in complying with environmental and other regulations, or the risk that revenues may not be sufficient to pay operating and capital costs.
• Improved levels of service or maintaining existing levels of service
Public private partnerships can introduce innovation in how service delivery is organized and carried out. It can also introduce new technologies and economies of scale that often reduce the cost or improve the quality and level of services.
• Enhancement of revenues
Public private partnerships may set user fees that reflect the true cost of delivering a particular service. Public private partnerships also offer the opportunity to introduce more innovative revenue sources that would not be possible under conventional methods of service delivery.
• More efficient implementation
Efficiencies may be realized through combining various activities such as design and construction, and through more flexible contracting and procurement, quicker approvals for capital financing and a more efficient decision-making process. More efficient service delivery not only allows quicker provision of services, but also reduces costs.
• Economic benefits
Increased involvement of local government in public private partnerships can help to stimulate the private sector and contribute to increased employment and economic growth. Local private firms that become proficient in working in public private partnerships can "export" their expertise and earn income outside of the region.