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Public-private partnerships (PPPs):
How can it be useful for your projects?

The Public-Private Partnership (PPP) represents an innovative financing model in which public authorities join forces with private players to design, finance and manage infrastructure dedicated to public service. This type of long-term collaboration enables public bodies, whether national, local or hospital-based, to benefit from the expertise of the private sector in the construction and management of crucial infrastructure.

What is a Public-Private Partnership (PPP)?

Definition and principle:

A Public-Private Partnership (PPP) is a financing method whereby a public authority calls on private service providers to finance and manage a facility that provides or contributes to a public service. In return, the private partner receives payment from the public partner or from the users of the service it manages.

A Public-Private Partnership is a long-term contractual agreement that allows a public entity (the State, a local authority or a public institution, particularly a hospital) to call on an operator to design, build, finance and manage public service infrastructure.

There are several types of PPP in France. Local public companies represent a particular form of PPP, with three distinct legal structures: semi-public companies, local public companies and single-operations semi-public companies.

Example of a Public-Private Partnership in France:

A concrete example of a PPP in France is the construction of the Hexagone-Balard building, which houses the headquarters of the French army. In this case, the French government decided to team up with private partners to finance and construct this imposing building. The private companies invested in the project, managed the design and construction, and are now responsible for the maintenance and management of the facilities over a defined period.

Advantages of PPPs :

  • Private finance: PPPs enable infrastructure projects to benefit from private finance, reducing pressure on limited public resources.
  • Expertise and efficiency: private companies provide technical expertise and operational efficiency, improving the quality and management of projects.
  • Risk transfer: PPPs transfer some of the project risk from the public to the private sector, limiting the financial burden on governments.

Main disadvantages of PPPs :

  • Higher costs: private financing can lead to higher financial costs, as private companies are looking for a return on their investment.
  • Complexity and delays: PPP selection and negotiation processes can be long and complicated, leading to potential project delays.
  • Loss of public control: PPPs can dilute public control over essential services, raising governance concerns.

Setting up a Public-Private Partnership:

Before embarking on a PPP, public authorities must carefully assess its suitability based on a variety of criteria. These include the source of remuneration for the private partner, the distribution of risks, whether commercial, legal or political, and an analysis of the cost-benefit ratio or the anticipated revenue from the project.

To manage the PPP effectively, the public authority forms a team dedicated to preparing and managing the project. This team draws on the expertise of legal, financial and technical advisors to carry out its tasks. Once the private partner has been selected and the financial details negotiated, a contract is drawn up and signed by both parties.

Implementing the project requires constant monitoring of the service provision. Contractual changes often occur, requiring renegotiation. Each project ends with an evaluation based on criteria established by a body independent of the public authority.

It is important to note that PPP regulations are complex and subject to frequent updating. They vary from country to country and depend on the sector of activity. To facilitate the process, all the resources needed to launch a PPP are available on the Economy, Finance, Action and Public Accounts portal. The EPEC guide to PPPs also provides detailed documentation on the entire process.

PPPs in different countries:

PPPs vary considerably from country to country due to cultural, economic and regulatory differences. Each nation adapts PPPs to meet its specific needs and local market conditions.

In the United States, PPPs are common in the construction sector. This is particularly the case for projects to build and manage transport infrastructure, such as toll motorways. For example, the project to modernise the Indiana East-West Toll Road, carried out in partnership with private players, cost a total of around 4 billion dollars. This PPP made it possible to renovate and maintain the motorway over a period of 75 years, with benefits for both the public authorities and the private companies involved.

In England, PPPs are often used in the health sector. One emblematic example is the Royal Liverpool University Hospital. This £842 million project was carried out in partnership with private companies to design, build, finance and operate the hospital for 25 years. This has helped to modernise health facilities and guarantee quality care for the population.

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