PPP model solution for building infrastructure
Public Private Partnerships (PPP) refer to a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility. Often, remuneration to the private party is linked to performance. Many governments are increasingly turning to PPPs to build major public infrastructure projects. But successful PPP project delivery goes beyond plugging the financing gap and having the respective PPP project assets and liabilities off the government’s balance sheet.Nick Prior, Global Lead Infrastructure and Capital Projects atDeloitte’s London office, believes that PPPs do work. “The problem isn’t typically with the PPP construct — it’s when the PPP model is used in circumstances when it is not the appropriate model,” he says. Indeed failed deals have burnt the fingers of governments and investors. Cases in point are the London Underground upgrade from 2003-2008 and the Cross City Tunnel financial collapse in Sydney in 2006 and again in 2013.The question is; do PPPs deliver? The answer is Yes and especially when well thought through. In the past three decades PPPs have been pivotal to the roll out of significant infrastructure projects around the world in countries like Australia, the UK, Singapore and Canada.Singapore has got the model right since its first foray into the PPP space with the completion of the Tuas Desalination Plant in 2005. A strategic PPP approach can mitigate the overruns and schedule delays that plague traditional infrastructure project delivery by delineating governance, allocating shared risk, integrating resources, applying best practices, and establishing a life cycle–long perspective of costs and accountability.Despite controversy over PPPs and an apparent back-flip by some quarters over plans to use the model for infrastructure financing, PPPs are unlikely to slip off the radar.Ibrahim Kitoo, Advocate of the High Court of Kenya and a Senior Legal Counsel with the Kenya Electricity Generating Company.