5.4.2  Social vs Economic infrastructure

Although the majority of the risks identified above will be applicable to both social and economic infrastructure projects, the allocation of risk between government and the private sector may be materially different.

An economic infrastructure PPP typically involves a 'user-pays' structure rather than a service charge structure which is most often relevant to social infrastructure. Typically, the user-pays structure involves the payment of tolls, fares or user charges for the use by the public or by the business community of facilities such as roads, bridge, tunnels and potentially, ports, airports and trains/trams.

Generally, the revenues earned through user charges are expected to be sufficient to enable the private party to repay the debt raised to fund construction of the facility, meet operating costs, pay the interest on the debt raised and give the required equity return.

In contrast, a social infrastructure project is generally availability-based and reliant on direct payment from government.  These differences drive a different ability to manage, and therefore optimally allocate risk.