Popular Models for Public Private Partnership

PPP has been a widely used concept since the early 1970s, especially for execution of capital intensive infrastructure projects (such as highways, power plants, airports etc.). The main idea behind a public-private partnership is to jointly develop a project with each party taking responsibility for a certain set of activities and the risks and rewards are appropriately shared.

Various models of PPP are currently in place, depending upon the nature of responsibility sharing between the government agency and the private company. These models are typically different from a regular ‘Turnkey Contract’ (which is nothing but outsourcing of execution function) and a ‘Joint Venture’ model (where both the parties are equally responsible for everything). The adjacent diagram presents the nature of private company involvement and degree of risk, for an exhaustive range of PPP models.

Some of the commonly used PPP models, along with the responsibility ownership are described hereunder.

Responsibility Matrix

In all of the above model descriptions it is assumed that at the end of the useful life of the project, all operations are transferred back to the Government. Therefore in some instances these models are also referred to with ‘Transfer’ - as DBOT, DBFOT etc.

Another popular terminology used in such instances, is that the project is referred to as ‘Concession’, the private company which is awarded the work is termed as ‘Concessionaire’ and the contract between the government and the private company, is termed as the ‘Concession Agreement’.

Few examples, across the Roads (Highways & Bridges) sector where the above PPP models have been used, are listed below.