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Public-Private Partnerships: Leveraging Private Resources for the Public Good

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Public-Private Partnerships (PPPs) share a common attribute: the provision by the private-sector of two or more functions related to an asset, facility, or service. Typically, these functions include financing, design, construction, operations, maintenance, management, logistics, and/or ownership. By “bundling” these functions, the provider can derive efficiencies across the entire scope of work—from design, to materials, to long-term maintenance strategies. These efficiencies can translate to cost savings, higher quality, and faster project completion. Generally, as more functions are bundled, more project risk and responsibility is transferred to the private-sector, spawning greater innovation. Given the magnitude of some projects, and the domains of expertise required, a PPP contract may be awarded to a consortium of companies with experience in different fields.

This report discusses key criteria, derived through an examination of four case studies, which should be used to determine whether a PPP is the appropriate procurement vehicle for a given project. Policy makers need to ask the following questions:

  • Is the PPP project conceived to provide a measurable, direct public benefit?
  • Will private-sector efficiencies in design, management, construction, and other domains offset higher costs associated with private-sector financing and risk transfer?
  • Are project requirements amenable to a diverse array of solutions?
  • Can a PPP also facilitate other objectives, such as modernizing while streamlining through consolidation?

This report also provides practical perspectives on establishing a PPP. PPPs can be conceptualized along a continuum that ranges from traditional Design-Bid-Build agreements in which the public sector retains the risk and responsibility to full concession agreements in which risk and responsibility is transferred to the private-sector. The continuum includes consideration of the delivery model, risk allocation, contract structure, payment mechanism, and financial structure. Structuring the PPP using the following framework, which is based on leading practices, can help to ensure success.

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