While there is no single, internationally accepted, definition of PPP, the essentials of a PPP arrangement which are encapsulated in a PPP Contract are:
• a long-term contract between a private party (the Private Partner) and a government entity (the Contracting Authority);
• for providing a new or existing public asset or service;
• under which the Private Partner bears significant risk and management responsibility; and
• where payments received by the Private Partner are linked to performance.4
The PPP Project functions transferred to the Private Partner - such as design, construction, financing, operation and maintenance - may vary from PPP Contract to PPP Contract5 but the inclusion of privately raised finance is key to ensuring that the Private Partner is financially exposed and therefore incentivised to perform.
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4 See "PPP Contract" definition in Defined Terms Section and associated footnote.
5 In this report, for example, a PPP Contract for a hospital may involve the Private Partner designing, building, financing and maintaining the hospital, but only providing certain operational services (such as cleaning, catering etc) and not clinical services which may continue to be provided by the Contracting Authority. Other types of PPP Contract (e.g. the design, construction, management and financing of a university accommodation block or a tolled highway) may involve more comprehensive operational services.