There is no uniform definition of a Public and Private Partnership (PPP), because each state implementing the PPP approaches this issue in its own way. However, the PPP is commonly understood as long-term co-operation between the public sector and the private sector in order to achieve a common objective.
Governments and local authorities all over the world seek funds for their public tasks from various sources. The private sector could be one of them. Financing the development of infrastructure using the PPP takes place both at the central level and the regional and local levels. The scope of such financing is largely dependent on the budget capabilities of the authorities on a given level.
The scope of work under a PPP project not only covers constructing or modernizing infrastructure facilities according to specific standards and terms, but it could also concern the passage, through the private sector, of the provision of specific services which are traditionally under public sector jurisdiction (e.g. water supply, passenger transport services, etc.). The public party involves the consortiums of private companies in the execution of infrastructure-related projects which are usually very capital-consuming. Such transactions are a popular method used for completing orders, especially when the public party wishes to use the skills and knowledge of the private companies and the possibilities of raising capital to swiftly create infrastructure without having to give up its property and without heavily encumbering the public budget.
By relieving the budget, the public party could use its own, limited resources for executing the other projects. However, relieving the budget should not be the only reason for using the PPP. The most crucial factor for which governments and local authorities should become involved in the PPP is value for money which specifies all the benefits - not only those relating to costs, but also the social ones - which should be derived as part of a specific project. And it is the very analysis of the value for money which should be one of the first steps taken when decisions are made about the PPP.
Another important element characteristic of the PPP method is the use of the skills of the private sector, its innovative nature and management methods in order to obtain infrastructure in every area, both social (e.g. education, health care services, sport and leisure) and economic (e.g. transport, environmental protection, water and sewerage services). Analysts of the private companies which become involved in a PPP project analyze the project costs throughout the term of the agreement. Therefore, they do not make excessive savings during the construction of a facility, so as to cut costs to the minimum and only compete with the other bidders on price terms. They strive to ensure the highest quality possible, because they know that such savings will be reflected during the future operation, thus adding to the costs of maintaining the infrastructure in question.
PPP transactions are complicated and time-consuming. Therefore, in order to ensure proper execution of the project, it is advisable to use the services of advisors since one of the keys to a successful transaction in respect of such projects is its proper preparation. The advisors could work for both the public sector and a private consortium offering comprehensive services. The public party could be supported by an advisor during the preparation of a feasibility study, the structure of the tender and the transaction during the phase of project marketing, the tender process and negotiations, as well as during the selection of the best bid.
