Before PPPs – Starting out

1.3 What are the major gaps in forming a successful partnership?

A range of possible gaps or deficiencies in the capacity of both public and private actors could hinder the formation of a successful partnership. Major gaps in this respect include:

• the reciprocal mistrust and lack of understanding of one another’s interests and needs across the public and private sectors;
• the absence of locally available information on, and experience with, arranging sustainable partnerships; and
• the underlying legal, political and institutional obstacles to forming effective public-private relationships.

These gaps often lead to lengthy negotiations, increased transaction costs and make smaller projects much less attractive to potential investors. In order to minimise the harm from such gaps, PPP arrangements should provide certain safeguards for the public and private sectors and for the community.

The public sector…

…usually expects the private sector to contribute in one or all of the following ways:

• to provide agreed services;
• to make agreed investments;
• to meet agreed standards/targets; and
• not to exploit any monopoly situation that might exist.

The private sector...

…expects the public sector to contribute in one or all of the following ways:

• to create an enabling environment suitable for the PPP;
• to pay agreed fees promptly and in full;
• to implement tariff increases as agreed; and
• to prevent unexpected competition from others during operation (exclusivity).

The community…

...expects the PPP to:

• provide appropriate levels of services; and
• be affordable to the community, either through direct charges or indirectly through general taxation.