Public-Private Partnerships (PPPs)

• Public-Private Partnerships (PPPs) involve contractual arrangements between a contracting entity and a private sector party.
• PPPs aim to provide public infrastructure and services traditionally managed by the public sector
• The private sector assumes some of the government's service delivery functions and associated risks over a significant period.

Key Characteristics of PPP Arrangements

• Long-term time horizon
• Bundling of several project phases into one contract
• Demand uncertainty
• Allocation of risk for potential losses shifted to the private partner
• Potential creation of a Special Purpose Vehicle (SPV)

Objectives/Benefits of PPP

• Increase private sector participation in development
• Increase availability of public infrastructure at the least cost to the government
• Leverage public assets with private sector resources
• Ensures risk sharing or transfer to the private sector
• Improves the quality of public service delivery
• Allows for mass expertise sharing

Guiding Principles of PPP Arrangements

• Value for money
• Risk allocation
• Ability to pay
• Local content and technology transfer
• Safeguarding public interest and consumer rights
• Environmental, climate, and social safeguards

Core Principles Explained

• Value for money means PPPs should offer greater value than traditional public sector projects with similar outputs.
• Achieved through a combination of service outcomes and risk transfer, while considering financial implications for the government.
• Efficient risk allocation determines if value for money can be achieved, with government optimizing risk transfer rather than maximizing.
• Risks should be managed by the party best suited to control them.
• End-user affordability is a key consideration
• The PPP option should demonstrate long-term affordability, in relation to public expenditure, and private sector investment returns.
• PPP projects should maximize local content and technology transfer to promote local industries in Ghana.
• Government must ensure PPP projects positively impact public interest, and safeguard vulnerable users by setting affordable tariffs.
• PPP activities must adhere to Ghana's environmental laws and standards.

Governing Principals of PPP Projects

• Clear objective and output requirements
• Accountability
• Transparency
• Competition
• Contracting authority, ownership, and commitment
• Stakeholder consultation process

Benefits of Public Private Partnership

• Reduced initial public capital outlay
• Shared risks in public service delivery
• Ability to leverage private resources

Key Advantages

• Accelerates timely infrastructure and public services
• Injected efficiency into public sector governance
• Increased public assets
• Diffusion of private-sector innovations
• Economic growth and wider employment

Benefits for Private Sector

• Provides investment opportunities for idle resources
• Encourages innovative design, technology, and financing
• increases profit generation

Risks Associated with PPP Arrangements

• Financial risk
• Technical and operational risk
• Demand risk
• Availability risk
• Construction risk
• Residual value risk

Types of PPP Arrangements (Service Concession Arrangements)

• Operate and Maintain (O&M)
• Build-Own-Operate (BOO) -Build-Operate-Transfer (BOT)
• Build-Transfer and Operate (BTO)
• Rehabilitate-Operate-Transfer (ROT)
• Design-Build
• Concession
• Lease

Variations Explained

• Operate and Maintain (O&M): Operator manages a facility, often paid a fixed fee, without risk of asset condition. Facility is owned, and capital requirement is responsibility of the grantor. The duration is 1 - 5 years.
• Build-Own-Operate (BOO): Operator finances, owns, and operates the facility. Government support may include tax incentives. An example in Ghana is the "One District, One Factory" program. There may be a duration of 25 - 30 years.
• Divestiture/Privatization: Grantor transfers ownership of a public asset to the operator through sales. Operator owns the asset.
• Build-Operate-Transfer (BOT): Operator provides the asset, operates it for an agreed time, and transfers ownership to the contractor.

Non Service Concession PPPs

• Build-Transfer-Operate (BTO): Transfer occurs before operation
• Design-Build (DB): Private sector designs and builds, public sector operates, and maintains
• DBO (Design-Build and Operate): Private sector designs, builds, transfers, and then operates
• Rehabilitate-Operate-Transfer (ROT): Operator is handed an existing facility to refurbish, operate, and then transfer after a period

Service Concessions

• A public entity transfers operating rights to a private party
• Agreements are long-term so the operator can recoup investment
• the operator injects capital into the entity
• The grantor transfers responsibility for public service delivery to a private sector entity.
• The grantor entity sets the initial prices and regulates price revisions.
• The grantor is a public sector entity.

Examples of PPP Arrangements in Ghana

• Divestiture/Privatization of state-owned enterprises
• Government services outsourcing without risk transfer
• Grants for mineral or petroleum rights
• Procurement of goods, works, and services by any public entity
• Non-commercial activities of the state

Public-Public Partnerships (PUP)

• Collaboration between public or non-profit organizations to improve service provision effectiveness.

PUP Objectives

• Resource Training
• Technical support
• Efficiency and capacity building
• Financing
• Collaboration

Advantages of Public-Public Partnerships

• Knowledgeable parties
• Non-profit driven
• Enhanced accountability since no trade secrets
• Lower transaction costs
• Possibility to reinvest financial resources
• Long-term capacity-building