Public sector
Public-private partnership (PPP)
A long-term contract in which a private company builds, finances or runs public infrastructure or services.
Last reviewedWhat does Public-private partnership (PPP) mean?
A public-private partnership is a long-term contract, often 20 to 30 years, between a government and a private company to deliver a public asset or service, such as a road, hospital, school or water plant. The aim is to pass to the private side the risks it manages better, such as construction delays, while the government keeps control of the service. Example: a government signs a 25-year PPP for a hospital; a private group builds it for 400 million, maintains it, and receives a yearly fee from the government. The World Bank and national PPP units publish guidance on when a PPP gives better value for money than traditional public procurement.
Example
The private partner usually designs, builds, finances and runs or maintains the asset, and is paid either by users (for example through tolls) or by the government (through availability payments), depending on performance.
Where does it come up in case interview prep?
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Related terms
- Availability paymentA regular payment from government to a PPP partner for keeping an asset open and up to standard.
- Net present value (NPV)Today's value of all future cash flows, minus the upfront investment.
- Discount rate and hurdle rateThe rate used to turn future cash into today's value.
- AdditionalityThe part of an outcome that would not have happened without the program or investment.
- Logic modelA chain from inputs to activities, outputs, outcomes and impact that shows how a program is meant to work.