A key element of PPPs, whether in the contract or joint venture form, is the long term pattern of the relationship between the public and private partners. Indeed, the long duration is an opportunity and a challenge for both parties. It allows creating synergies as well as conflicts, innovative solutions as well as obsolete unchangeable output, stabilizing or destabilizing fiscal budgets, detonating social backlash or fostering constituencies' support. In all cases, the long term duration bounds the parties as marriages do. Yet in PPPs both parties are called to have an active role in the marriage, and not only at the signing ceremony.
The obligations of the parties for the duration of the partnership are crystallized in highly complex contract. The private party's performances are normally stated in terms of required final output (see below). This implies in many cases the bundling of the construction and operation phase, which are contracted to a single private entity, normally in the form of a consortium. The long term dimension allows the private parties to manage quite freely its investment along the duration of the partnership for providing the mentioned output-based services, eventually benefitting from its productive efficiency. The benefit for the public party is having a single counterpart (in some jurisdiction called general contractor), that is entrusted of achieving specific outputs, which ultimately generate short and long term public outcomes. The reputational risk for the PA and the private parties, in addition to a system of incentives and penalties, provides some form of glue for the partners to stay together. Yet, PPPs allow the parties to manage the endogenous, as well exogenous risks which may affect the stability of the partnership in the long run, with an enhanced relationship management that includes the participation of affected stakeholders.
| Long term duration of PPP [Portugal: Decreto-Lei n.º 86/2003, de 26 de Abril, Artigo 2.º] 1 - Para os efeitos do presente diploma, entende-se por parceria público-privada o contrato ou a união de contratos, por via dos quais entidades privadas, designadas por parceiros privados, se obrigam, de forma duradoura, perante um parceiro público, a assegurar o desenvolvimento de uma actividade tendente à satisfação de uma necessidade colectiva, e em que o financiamento e a responsabilidade pelo investimento e pela exploração incumbem, no todo ou em parte, ao parceiro privado. 5 - Excluem-se do âmbito de aplicação do presente diploma: [..] e) Todos os outros contratos de fornecimento de bens ou de prestação de serviços, com prazo de duração igual ou inferior a três anos, que não envolvam a assunção automática de obrigações para o parceiro público no termo ou para além do termo do contrato. [Brazil: Lei 11.079, Art. 2] [..] II - the term for the provision of services is less than 5 (five) years; or |