It is important to understand some of the drivers for PPP projects and why this is attracting attention globally. As mentioned earlier and probably the most common reason is the lack of public funding for road projects. Even though this was not the intent of the PPP model, nevertheless it has been one of the key drivers.
Originally the PPP model was developed in the late 1700s when there were few roads, rail transport was developing, and harbors and ports were being constructed. The PPP model was designed to increase the pace of infrastructure delivery via private financing as well as public financing. That is the beauty of this model and was intended to quickly develop the infrastructure. A systematic application of public and private investment could build the infrastructure at a rapid pace to achieve economic viability. Today's situation is quite different and expansion to meet the urban congestion is an important part for using the PPP model.
The efficiency of the PPP model is another reason why many countries are trying to use it. This efficiency can be understood in several ways. First the efficiency should result in "Value for Money" (VfM) and also to complete projects faster than traditional methods. In addition, there should be the incentive to utilize innovations and better quality (more durability) by seeking after whole life solutions or "Life Cycle Cost" (LCC). These hopefully will be the achievements from successful PPP projects.
Off-balance sheet (not considered as a public debt) were previously considered as a driver or incentive to use PPP, but the new European Union (EU) rules have changed and has a new definition of what is considered off balance sheet. This is not a significant driver anymore, but was mostly that in the past.
Another driver was to pass through risks from the public sector to the private sector, because it was the government and eventually the tax payers who took the risks in traditional projects. The old saying about risk is allocating them to the party that is best able to influence and manage risks. In PPP projects risks are an essential part of the process and include passing construction, design, and financial risks to the service provider. As one is more experienced in risks, then it becomes an issue to optimize the risk transfer, because one could pay too much for risks that never occur. Many have developed sophisticated risk analyses and matrixes for the PPP model, which can assist in determining VfM and the tradeoff between certain risks. This also can be accomplished with the assistance of experts dealing with these risks and by the financial advisors to the client.
One issue that is not so apparent is the fact that PPP will not disrupt other projects in client's portfolio package of normal budgetary allocations. So this means that the other capital investment projects through the traditional budgetary process will not be affected as this is typically a separate line item in the budget calculations.
Another small issue is that it helps create a national learning process of PPP and assists the promotion of international competitiveness, whether it is for consultants or the construction sector. This is demonstrated by the presence of many consultants, legal advisors, financial advisors, and other types of consultants that are coming from England and elsewhere in Europe. Even some financial lenders from Australia are entering the market as location is not the determining factor when dealing with private finance.