Under a PPP arrangement, a firm is given the responsibility for financing the investment as well as for building, managing, and maintaining the infrastructure used to provide the services. When a PPP is created, the entire project is delegated to the private firm through a global contract. This combines the investment's financial aspects with the conditions under which the infrastructure is to be built, managed, and maintained. Moreover, this contract allows the firm and investors to be compensated over a long period. This is likely to have budgetary consequences over the project's lifespan.
The private sector's involvement does not mean that the public sector has no role to play. Conversely, governments and, more generally, public institutions should ensure that social obligations are met. This requires effective sectoral reforms as well as adequate public financial management. For successful PPPs, it is important to recognize that both public and private sectors each have certain advantages, relative to the other, in performing specific tasks. The government can contribute to a PPP in several ways. First, it can provide capital for its share of the investment (through tax revenues), transfer assets, make guarantees, or provide in-kind contributions that ease the partnership's functioning. In addition, the government provides social responsibility, environmental awareness, local knowledge, and an ability to mobilize political support. In turn, the private sector provides expertise in commerce, management, operations, and innovation for efficient business operation. The private partner is frequently required to invest in the project, although this may depend upon the specific contractual agreement (see, for instance, Asian Development Bank 2008). In fact, transferring responsibility to the private sector for mobilizing the required finance for infrastructure investment is one of the major differences between PPPs and conventional procurement (World Bank 2012).
PPPs have several specific objectives. First, they are meant to improve the quality and performance of public services to the benefit of users/consumers. Second, they are supposed to reduce or, at least, ease the time profile of the taxpayers' burden. Third, they should help the public authorities, who are responsible for delivering services and optimizing the realization and quality of those services. These objectives are pursued by two main means. First, the public partner takes advantage of the financial resources and the technical expertise of the private sector. Second, the risks associated with the project are allocated between partners so that each partner bears the risks that it can handle more efficiently.
Despite some common features of PPPs, they are not approached the same way everywhere. Some countries choose to utilize PPPs only in certain sectors. This can reflect investment priorities or areas requiring the greatest improvement in service performance. Sectoral concentration can also reflect the willingness to prioritize sectors in which PPPs are expected to attain the most success. Other countries, conversely, identify sectors (or services within sectors) for which reliance on PPPs is ruled out. These are sometimes called core services, i.e., services that should be exclusively provided by the government and hence should not be delegated to the private sector through a PPP. Definitions of core services can vary across countries, mirroring local preferences and perceptions (World Bank 2012).