Various types of PPPs

PPPS can be structured in different ways, which tend to vary with increasing risk, responsibility and financing for the private sector. The most common PPP models that are used are described below.

Build-Transfer (BT)

Under this model, the Government contracts a private partner to design and build a facility in accordance with the requirements set by the Government. Upon completion of the facility, Government assumes responsibility for operating and maintaining it. This method of procurement is sometimes called Design-Build (DB).

Build-Lease-Transfer (BLT)

This model is similar to Build-Transfer, except that after the facility is completed, it is leased to the public sector until the lease is fully paid, at which time the asset is transferred to the public sector at no additional cost. The public sector retains responsibility for operations during the lease period.

Build-Transfer-Operate (BTO)

Under this model, the private sector designs and builds a facility. Once the facility is completed, the title for the new facility is transferred to the public sector, while the private sector operates the facility for a specified period. This procurement model is also known as Design-Build-Operate (DBO).

Build-Operate-Transfer (BOT)

This model combines the responsibilities of Build-Transfer with those of facility operations and maintenance by a private sector partner for a specified period. At the end of the period, the public sector assumes operating responsibility. This method of procurement is also referred to as Design-Build-Operate-Maintain (DBOM).

Build-Own-Operate-Transfer (BOOT)

Here the Government grants a private partner a franchise to finance, design, build and operate a facility for a specific period of time. Ownership of the facility goes back to the public sector at the end of that period.

Build-Own-Operate (BOO)

In this model, the Government grants a private entity the right to finance, design, build, operate and maintain a project. Government retains ownership of the project. Design-Build-Finance-Operate/Maintain (DBFO, DBFM or DBFO/M): Under this model, the private sector designs, builds, finances, operates and/or maintains a new facility under a long-term lease. At the end of the lease term, the facility is transferred to the public sector. In addition to being used for new projects, PPPs can also be used for existing services and facilities. Some of the models that fall under this category are:

Lease: The Government grants a private entity a leasehold interest in an asset. The private partner operates and maintains the asset in accordance with the terms of the lease.

Concession: The Government grants a private entity exclusive rights to provide, operate, and maintain an asset over a long period in accordance with performance requirements set out the Government. The public sector retains ownership of the asset, but the private operator retains ownership over any improvements made during the concession period.

Divestiture: The Government transfers all or part of an asset to the private sector. Generally, the Government includes certain conditions on the sale to require that the asset be improved and services be continued.

Why PPPs matter

Public-private partnerships are unlikely to fully replace traditional financing and development of infrastructure, but they offer several benefits to governments trying to address infrastructure shortages or improve the efficiency of their organisations. These benefits are: ◆ PPPs allow the costs of the investment to be spread over the lifetime of the asset and thus can allow infrastructure projects to be brought forward by years compared with the pay-as-you-go financing typical of many infrastructure projects;

◆ PPPs have a solid track record of on-time, on-budget delivery;

◆ PPPs transfer certain risks to the private sector and provide incentives for assets to be properly maintained;

◆ PPPs can lower the cost of infrastructure by reducing both construction costs and overall life-cycle costs;

◆ Because satisfaction metrics can be built into the contract, PPPs encourage a strong customer service orientation; and

◆ Finally, because the destination, not the path, becomes the organising theme around which a project is built, PPPs enable the public sector to focus on the outcome-based public value they are trying to create.

◆ Dr Mugano (Ph.D) is an author and expert in trade and international finance. He has successfully supervised four Doctorate candidates in the field of trade and international finance, published over twenty-five articles and book chapters in peer reviewed journals. He is a Research Associate at Nelson Mandela University, Registrar at Zimbabwe Ezekiel Guti University and Director at Africa Economic Development Strategies. Feedback: Cell: +263 772 541 209. Email: gmugano@gmail.com