What are the particularities of public-private contracting?
What are the particularities of public-private contracting?
Public-private partnership (sometimes written by its initials PPP), also known as public-private contracting, or public-private collaboration, is a model of collaboration between the public sector and the private sector to carry out projects of interest public. is a model of collaboration between the public sector and the private sector to carry out projects of interest public. This form of association has several particularities that make it distinctive:
- Public interest objective: Public-private contracting has as its main objective the provision of services or the execution of projects that benefit the community or the general interest. These projects may include infrastructure, public services, urban development, among others.
- Sharing risks and responsibilities: Both parties share the risks and responsibilities of the project. This implies that the private sector assumes a certain degree of financial and operational risk. This risk motivates to find efficient and high-quality solutions.
- Mixed Financing: Generally, PPP projects are financed through a combination of public and private funds.
- Long duration: This allows the private sector to recover its investment and obtain an adequate return.
- Transfer of operations: In many cases, the private sector assumes responsibility for operating and maintaining the infrastructure or service for a specified period. This includes its management and maintenance.
- Evaluation of public and private benefits: PPPs seek to find benefits for both the public (satisfying community needs and improving the quality of public services), and for the private sector (obtaining economic and commercial benefits).
- Transparency and control: Subject to adequate controls to avoid corruption and guarantee responsible management.
An example of public-private contracting is the public works concession contract, by which a Public Administration (grantor) entrusts a private company (concessionaire) with the construction and operation of a public work, such as a highway, a hospital or a port. The concessionaire assumes the risk and venture of the work and receives as consideration the right to exploit it during a determined period, charging a toll or rate to the users or receiving a fee from the Administration.