We have discussed the main attractiveness of a PPP when the contract bundles the different activities involved in the project. In some cases, however, the contract un-bundles services related to the management of the facility undertaken by the private-sector party. Two types of services may be distinguished: 'soft' facility-management services (e.g. cleaning, catering, security), and 'hard' facility-management services (e.g. routine and/or life-cycle maintenance of buildings and equipment). Soft services neither require significant capital outlays to be provided nor affect the value of the project's major capital assets, whilst hard services do involve capital outlays and affect the value of capital assets.
In choosing between bundling and unbundling of soft and hard services, there is a trade off to consider. Bundling soft and hard facility-management services in the contract has the advantage that, being responsible for providing both soft and hard services, the private-sector party cannot argue availability failures are not its fault but an otherwise independent soft service provider's.
On the other hand, there are benefits for the public-sector party in unbundling soft and hard services, and thus in dealing with separate soft-service providers. These benefits arise, for example, because soft-services provision generally requires less capital investment (if any) than hard-services provision. As discussed in more depth in section 6 this makes it desirable to choose shorter-term contracts for soft services so as to benefit from the competitive pressure that more frequent tenders guarantee. Hard services instead, being more capital intensive, tend to require longer-term contracts for the protection of investment. The cost of this is the reduction in the competitive pressure.
In addition, separate tendering for soft services favors the participation of small firms to the tendering process and thus helps the competitive pressure; small firms tend not to participate in large and complex tenders for PPP projects.
A decision to unbundle services is to be made considering not only the above trade off, but also other sector- and country-specific factors. For instance, in the health sector, there are no uniform experiences across countries regarding service unbundling: in Portugal, a PPP for the construction and operation of a hospital typically includes the provision of clinical service, while in the UK hospital projects do not include these services.
A project may involve different services, e.g. a road project encompassing construction of a highway, maintenance service provision, accident recovery service, etc. In particular, the services related to facility management can be classified in two categories: 'soft' and 'hard'. Soft services neither require significant capital outlays to be provided nor affect the value of the project's major capital assets, e.g. cleaning and security. On the contrary, hard services do involve capital outlays and affect the value of capital assets, e.g. life-cycle maintenance services.
In some cases, it is possible and convenient to unbundled soft and hard services, purchasing them from different providers through contracts of different duration. These cases arise, for instance, when the providers of soft services are small firms that employ most of the staff and so are vulnerable to environmental and social conflicts; and when the soft service providers cannot be heavily penalized through performance deductions, but their failures largely affect the public opinion about the project since they constitute an inter-face between the facility and the final users. Then, if unbundling is undertaken, short-term contracts should be used for contracting soft services as little investment is required in providing them. In contrast, long-term contracts are advisable for purchasing hard services since they involve large capital expenditures. This is the case of PPP of hospitals in Portugal where the contract length for core services is much longer than for cleaning services.