A Public-Private Partnership (PPP) is a mutually beneficial collaboration between a public agency and a private sector entity. Through this contractual arrangement, the skills and assets of each sector are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.
Projects with the greatest likelihood of success are those high priority projects that are clearly defined and have a demonstrated public sector commitment. Projects delivered through a PPP must allocate the risks fairly between the parties, with each sector assuming the risks that they are best able to manage.
The public agency usually assumes the project definition risk by undertaking the environmental clearance effort, assessing financial feasibility and garnering stakeholder and political commitment. The private sector can best assume the financial risk, such as project financing, construction and perhaps facility management.
We are looking at PPPs as a means to accelerate delivery of our much-needed transportation projects. If we can use up-front private investment to finance some of the projects, we will likely see construction cost savings due to today's favorable bidding environment, efficiencies in alternative delivery and/or management strategies, congestion mitigation, earlier achievement of CO2 emissions reductions and earlier completion of planned rail-bus-highway transportation network.
A private investor will be entitled to a reasonable return on the financing investment made in the public project. Therefore, to determine whether delivering the project through a PPP is the most financially responsible method for the public agency to pursue, we must undertake a thorough analysis and comparison of life-of-project costs to be incurred both by delivering, operating and maintaining a project as a strictly public project, and by delivering it with private financial participation.
These decisions can be made only after extensive analysis to fully understand project details. The processes we've initiated are outlined on the Project Evaluation Process chart.
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