PPPs use of infrastructure service PPP contract types that reflect the long- term public-private institutional dynamic integration. That integration includes the redefinition of roles and responsibilities of the public and private parties. The PA analyzes in a participatory process the service needs and defines the level of public services to be provided. The long term characteristic of the institutional-contractual type PPP allows:
• defining services in terms of required final output13
• bundling the construction and operation phase of an infrastructure service project
• inserting a certain level of flexibility into the contract that can be subsequently managed according to the change of circumstances by the partners
PPP are mostly associated with concessions, which are normally characterized by a "user pay" principle. As a full user pay system is only available for self-sustainable concessions, non self-sustainable concessions are generally characterized with the presence of some kind of subsidy. That is normally provided by the public administration (PA). By that subsidy, the PA integrates the payment of users to make the underling project economically or financially viable.
PFI model, which applies a "public sector pay" principle is an evolution of the concessional model. The PFI model, which has its origin and denomination in the Private Finance Initiative, usually relates to the procurement of public facilities where usage risk cannot be transferred to the private sector such as in the case of social infrastructures. The payment to the private service provider by the PA is nonetheless based on the availability of the facility.
The PFI deal [HM Treasury, Managing public Money, 2007] Private Finance Initiative (PFI) deals offer public sector organisations a structured way of contracting with a supplier to construct a facility and then purchase associated services of a specified quality over a sustained period. Because the private sector contractor puts its own funds at risk, it has powerful incentives to deliver to time and cost, and can thus offer value for money. PFI procurement is a flexible, versatile and often effective technique. But it is not appropriate for every project. |
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13 ABATI A., Public Private Partnership. Guidance, M& J Consulting, 2007 pp.61