Publicprivate partnerships PPPPFI

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Public-private partnerships (PPP/PFI)

• Brian Atkin

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Misconceptions

• Public-private partnerships (PPPs) are
  unnecessary the government can pay for new
  roads, bridges, hospitals etc.
• The private sector will destroy the health sector
  (and kill people) by bringing the profit motive
  into treatment (i.e. surgery).
• The private sector simply cannot be trusted.

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What is a PPP?

• Public-private partnerships (PPP) are not a new
  concept, having been used extensively in, for
  example, the outsourcing of services (e.g. IT).
• More recent use has been in procuring capital
  assets (roads, bridges, schools, colleges,
  housing, prisons etc.) as the basis for providing
  a service.
• DBFO, BOT and BOOT are types of PPP.

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Definitions

• DBFO Design, Build, Finance and Operate
• DCMF Design, Construct, Manage and Finance
• BOO Build, Own and Operate
• BOOT Build, Own, Operate and Transfer.
• BOT Build, Operate and Transfer

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More

• A compelling example of PPPs is the UK's Private
  Finance Initiative or PFI, as it is more
  generally known.

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What is the PFI?

• The PFI is, in fact, an extension of privatising
  and outsourcing (contracting out) services, a
  trend that was favoured by the UK government in
  the late 1980s and early 1990s.
• The PFI is intended to reduce public sector
  borrowing and to promote efficiency in project
  finance and execution and services provision.
• The PFI market is one of the largest.

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More

• It is essentially a method of procuring capital
  projects, to enable enhanced service delivery,
  but where capital expenditure in the present is
  converted to an expenditure commitment in the
  future.
• An external company, which will usually design,
  build and operate the facility, sponsors a
  project and holds an equity stake in it.

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Attractions

• , the search for new opportunities to develop
  profitable business provides the private sector
  with an incentive to be innovative and try out
  new ideas - this in turn can lead to better value
  services, delivered more flexibly and to a higher
  standard (UK government report).

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And

• PPPs are based on the principle of value for
  money, as the outcome of increased incentives,
  innovations and utilisation of the private
  sectors commercial skills in the planning,
  design and provision of public services, etc.
  (Swedish government report).

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And

• For the industry there are many positive
  benefits Financial cost control of the project
  management of the project and design and
  technological implementation of work all of
  which should lead to long term improvements in
  the efficiency of the firm. (Birnie 1999).

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How PPP contracts work

• In PPP contracts
• the public sector no longer takes responsibility
  for the writing of a specification through
  consultants it specifies (with consultants and
  advisors) its service requirements
• the public sector no longer manages a
  construction contract it waits for its specified
  service through the PPP services contract - the
  private sector manages the contract

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And

• In PPP contracts
• the public sector no longer pays capital over the
  construction period it pays for the service on
  receipt and only on receipt - the private sector
  pays the capital costs, which it recoups through
  the service payments
• the public sector no longer operates the asset
  it monitors service delivery and performance.

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Transformation
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Example projects

• Cross Harbour Tunnel Hong Kong
• Channel Tunnel UK/France
• Channel Tunnel Rail Link - UK
• Second Severn Crossing (Bridge) - UK
• Motorways in France and Spain
• Arlanda Express Sweden
• And in Finland?

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Paying for services how?

• Roads and bridges - access
• Residences - living (for students)
• Hospitals - non-clinical services
• Water treatment - water and sewerage services
• Prisons - custodial services