Politics and budget pressures play havoc with proper maintenance of existing infrastructure. There always seems to be another, higher priority: some program or crisis requires more urgent funding than rehabilitating an aging road or school. Or a budget deficit may push funding for infrastructure maintenance further down the priority list. Or an upcoming election may lead politicians to delay funding for rehabilitating a wastewater treatment plant to make way for a sexier program or project. Moreover, the effect of reducing spending on maintenance is rarely immediate; politicians who opt to cut back such spending may have left office long before society begins to complain loudly about crumbling roadbeds or overburdened electricity networks.
The result: maintenance is often deferred. In some countries, only 10 percent of the road network is being maintained. California currently carries approximately $12.5 billion in deferred transportation maintenance at the state level and $10.5 billion locally.
Such deferred maintenance imposes huge costs in the long run-for example, early intervention costs about 20 percent less than maintenance postponed to the latter quarter of a road's life. Continual deferral results more safety problems in a shorter infrastructure lifespan, reduced quality of services, and generally worse financial outcomes.
Well-designed PPPs can ameliorate these problems by transferring certain construction and maintenance risks to the private partner. Among the risks that can be assumed by the private partner are:
• Design risk
• Meeting required standards of delivery
• Incurring excessive cost overruns during construction
• Completing the facility on time
• Underlying costs to the service delivery operator, and the future costs associated with the asset
• Industrial action against or physical damage to the asset
• Certain market risks associated with the project
The ability to shift some or all of these risks to the private sector is an important benefit of PPPs. Payment structures require the assets be available and properly maintained over time. The public sector thereby gains greater confidence in the level of its spending commitments over the lifetime of the asset. Greater cost transparency, in turn, supports more effective planning and helps to avoid cuts in other service areas as a result of unexpected infrastructure costs.