PPPs differ from market to market, but basically consist of a contract between government and a private company which is tasked with providing an asset or service for a defined period. The private partner takes on management and risk responsibility in return for remuneration – either as a direct payment from the public sector, or through payments or fares levied on end users.
PPPs are used globally – in all sectors – to deliver the hard infrastructure needed to support development, and are seen as bringing together the best of both worlds – private sector efficiency and public sector understanding of local needs.
However, PPPs are not perfect. Many governments are conscious of the electoral cycle, so often put short to medium-term gains over long-term interests, while limited budgets may mean short-term affordability is chosen over optimised solutions.
As for the private sector, it will deliver on the brief, but needs to be incentivised to focus on resilience and sustainability when it has historically been rewarded for delivering solutions at the lowest cost.
PPPs will become more common over the coming decade – even in countries with limited experience of the procurement method – so embedding sustainability in the process is crucial.
Five changes in behaviour to attract private finance:
1. Focus on leadership and political will
Both public and private sectors need to make sustainability paramount, with an understanding of the long-term benefits of doing so.
2. Optimise value for money analyses
Consider the outcomes you want to achieve and how well these fit into the PPP framework.
3. Qualitative evaluation
Measure PPP schemes against the best and most stringent standards and criteria to promote quality.
4. Improve stakeholder engagement
The best PPP schemes are those in which all stakeholders have contributed to shaping the project from an early stage. Training may be needed to drive those solutions.
5.Consider whole-life costs
Sustainability means looking at the full project lifecycle, not aiming for the lowest engineering, procurement and construction costs.
And five changes in procurement:
6. Begin with due diligence
Consider what makes the project bankable from the earliest stage.
7. Appoint professional advisors early
They will help steer the PPP project forward.
8. Make the most of ESG assessment tools
These will optimise the sustainability and resilience of the project.
9. Develop a PPP checklist for the SDGs
PPP projects have the potential to deliver the UN’s SDGs. Mott MacDonald is working with the UN Economic Commission for Europe and the University of Manchester to develop a scoring system against which project performance and outcomes can be measured. The system could form the basis for bankability criteria, unlocking finance.
10. Use best practice standards which have worked elsewhere
Rather than reinvent standards, contracts and specifications for each new project, use and refine those which have been proven to do the job.