1.3.2 PPP allows the public sector to get better value for money in the delivery of the public services. Moreover, by switching its role from a provider to a buyer of services, the Government can focus on its core responsibilities of policy-making and regulation. Through closer partnership with the private sector, efficiency gains and other benefits can be reaped, particularly from the following sources:
a) Private Sector Expertise and Competitive Advantage. PPP allows Government to tap on to the private sector's expertise, innovation and competitive advantages in the delivery of public goods and services. This could raise quality and improve cost effectiveness through innovative designs or business tie-ups. In addition, the Government can also tap on the private sectors' networks to maximise asset utilisation and commercial potential. One such example is the Sports Hub where private sector connections and expertise can be leveraged on to bring in world class sporting programmes, in order to enhance asset utilisation.
b) Cost Efficiency through Lifecycle Optimisation. By combining design, build, maintain and operate functions in the same PPP contract with the provider, it gives the provider a strong incentive ensure the project design takes into consideration operational and other lifecycle costs. PPP also allows for private sector scrutiny of design specifications and the business model, with the possibility of achieving the same outcomes at lower cost.
c) Optimal Sharing of Risks. In a PPP project, Government and the private sector share the risks of delivering a service. The risks may be allocated according to each party's expertise in managing and mitigating the risks in the service delivery process. Typical risks that are allocated to the private sector include design, construction and financing risks. On the other hand, the public sector may take on political and regulatory risks, while other risks such as demand / revenue risks will be assigned to whichever party is best able to bear it. By transferring the financial risks to the private sector, there will also be greater certainty over Government's future cash flows.