2.1.1  Overview of a PPP

A PPP is a long-term contract between the public and private sectors where government pays the private sector to deliver infrastructure and related services on behalf, or in support, of government's broader service responsibilities. PPPs typically make the private sector parties who build infrastructure responsible for its condition and performance on a whole-of-life basis.

PPP projects cover economic and social infrastructure and typically include both a capital component and an ongoing service delivery component of non-core services.

The principal features of a PPP are:

•  provision of a service involving the creation of an asset involving private sector design, construction, financing, maintenance and delivery of ancillary services for a specific period;

•  a contribution by government through land, capital works, risk sharing, revenue diversion, purchase of the agreed services or other supporting mechanisms; and

•  the private sector receiving payments from government (or users in economic infrastructure) once operation of the infrastructure has commenced and contingent on the private sector's performance in supplying the services.

PPP projects are part of a broader spectrum of contracted relationships between the public and private sectors to produce an asset or deliver a service. However, these Guidelines are intended to apply to the private provision of services for which there is a public infrastructure element and a private financing element.

These Guidelines do not refer to private investment in infrastructure in jurisdictions where government does not have a direct interest in the provision of public services. This form of private investment in infrastructure represents a significant proportion of infrastructure investment in Australia. An example would include investment that is financed solely by private companies for their own purposes (e.g. a gas pipeline between states, or roads built from a mine to a port).

These Guidelines do not cover procurement methods such as alliancing, managing contractor, outsourcing or traditional procurement methods where the private sector is also involved in delivering infrastructure or associated services.