PublicPrivate Partnerships

There are certain infrastructure and other public works which are not favoured for PFI because they do not give the assurance of providing an adequate return on funders investment. Yet it may be in the interests of public authorities to involve a private contractor in executing a project because of his experience and efficiency (when well run) and the capital contribution made by the contractor and his funders which reduces capital borrowings by the public sector.5 Thus instead of PFI some form of PublicPrivate Partnership (PPP) may be adopted, under which the public authority takes on some risks in order to make the project attractive enough for the contractor and his financial backers to undertake it. Thus if a road is constructed and financed by a contractor and he is to be rewarded by shadow tolls on the number of vehicles using the road annually, the promoter may guarantee a minimum payment to the contractor.
Thus the public authority takes the risk of traffic being less or more than that estimated. There are many other possible arrangements under PPP. Some PPP projects are quasi PFI such as when a public authority provides a grant towards the capital cost, or arranges for a grant to be received from some other funding body, such as the European Community (EC).

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