Funding source - if user charge

It is often said that PPPs expand the funding available for public infrastructure. But this is only true in the case of user charge PPPs. Service-payment PPPs simply substitute government borrowings for a different liability - a commitment to pay a service payment to the SPV. When assessing the credit rating of a government, ratings agencies consider all forward financial commitments of the government, including its commitments to pay service payments on PPPs.

However, where there is a significant contribution to the funding of a project from user charges, a PPP does expand the funding available to government.

Although service-payment PPPs do not expand the funding available to government, they do allow government to spread its payment obligations over a long period of time. The diagrams below compare the payment obligations of government on a typical traditional procurement with those on a service-payment PPP.