Private and Public Partnership
About a Private and Public Partnership
A private and public partnership (PPP) is a private business or a government project which is financed and managed by a partnership of one or more private entities and the government. PPP incorporates a private entity and a public entity authority in which private entity offers projects or services to the public and presumes substantial financial, operational, and technical risks of the project. In other different types of PPP, the expenses of partaking the project is exclusively borne by the users of the service and not the general public. However, in other types, the capital investment expenses are met by the private entities on the contract basis with the government to offer accepted services and the expenses of offering the service are partially or wholly borne by the government. The contributions of the government to the PPP are mostly made in form of transfer of existing assets. However, for projects that are focused on developing public goods such as the sector of infrastructure, the government may offer a capital contribution in form of an instant grant with the aim of making the project to be much attractive to the private entrepreneurs (Barlow, Roehrich, and Wright, 2010). In some other cases, though rare, the government can uphold the project through offering subsidies on revenue such as tax breaks or through elimination of the guaranteed annual revenues for a specified period of time.
Naturally, consortium of a public entity forms a special firm referred to as a special purpose vehicle (SPV) to establish, develop, manage, and operate the asset for a period stated in the contract. Nevertheless, in cases where the public sector (government) has funded the project, it is naturally (though in rare case) allotted a share on equity in the SPV. The consortium commonly incorporates the building contractor, bank lenders, and a maintenance company. It is the SPV which signs the contract with the subcontractors and the government to construct and maintain the facility. In the sector of infrastructure, contracts and complex arrangement that secure and guarantee the flow of cash make the public-private partnership projects major candidates for financing the project. A hospital building constructed and financed by a private entity and leased to government hospital authority is an example of a natural PPP (Barlow, Roehrich, and Wright, 2013). The government hospital authority provides medical services while the private entity offers non-medical and other housekeeping services. Many public entities all over the world, especially the government sectors, concerned with public infrastructure form the public-private partnership with focus on reducing the cost of construction. Though in many cases this is not achieved, and most likely, it is the private sector that benefits over the government. However, PPP is highly encouraged globally, particularly in matters concerning the infrastructure.
PPP in Austria, Australia and New Zeland
Public investments in Austria infrastructure through the public-private partnership is seen as a significant way of maintaining economy of the country as it was identified with the PPP in a European Commission Communication. As a result of the PPP significant role it has adopted in Australia, the development of public entities such as infrastructure, the European Expertise Centre of public-private partnership were developed which upheld the public firm capacity to execute PPP and contribute to timely problem resolutions which are general all over Europe.
PPP offers a distinctive perception of the Australian network and collaborative issues of the management of the public. The development of the PPP as a practice and a concept in Austria is a new public management product of the overdue 20th century and that has enabled the nation to overcome overwhelming pressures of globalization. The public-private partnership term is prone to thinking as an individual rather than the entire partnership, which makes it difficult to find a commonly agreed description of PPP.
A general problem with the projects of PPP in Australia is that private entrepreneurs gain a rate of income which is bigger compared to the bond rates of the government and yet majority or all the capital investment risks linked with the project is borne by the government. In fact, the Australian government plays the core role in financing PPP projects as compared to the private sectors. This is actually very significant in determining compatibility and the competence of economic circumstances of public-private partnership. Private sectors in PPP projects usually ignore the role played by the tax payers in financing the project. However, private sectors benefit more from the PPP projects as compared to benefits that public sectors receive.
Several studies of public-private projects carried out in Australia showed that the majority of the projects being planned were inferior to the public procurement standard model on the basis of tendering competitive of the public owned constructions (Zheng, Roehrich, and Lewis, 2008). Among the response given to the negative results involved the creation of formal processes for the evaluation of the PPP in which the target was on value for money rather than reduction of costs.
Another case of PPP was observed in New Zealand treasury in 2009, where the response to enquires through the current national party government, provided a report on PPP projects which showed that there is less reliable empirical confirmation concerning the benefits and the costs. However, there are other means of obtaining finance for the private sector together with the benefits of PPP, although, they should weigh against the complexities and the rigidities of contract entailed to.
Presently, an improved model of public-private partnership is being talked about which is referred to has public-private community partnership (PPCP) model, whereby private sector and government players team up to develop social welfare and eradicate major target of private players on benefits. The model is mostly used by growing nations like India (Barlow, Roehrich, and Wright, 2013). The public-partnership model enables Australia to overcome overwhelming pressure of globalization. Therefore, the public partnership model varies significantly in maintaining the economic growth in developing nations which are frequently faced with inflations.