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Follow on Google News | Public private partnerships: to be or not to be, that is the questionBy: PFMConnect Benefits of PPPs to the public sector The PPP model removes the challenge of having to undertake design, construction and managerial tasks, eliminates the risk of budget overruns and avoids the government or public sector organisation's need to raise loans to defray capital costs. The latter, in turn, restricts the public entity's overall debt burden and this can be of considerable benefit to governments or public sector organisations that face serious difficulties in raising loans by conventional means or have agreed debt ceilings that they would otherwise breach. The major innovation offered by the PPP model is the transfer of risk from the public to the private sector which is documented in PPP contracts through measures such as performance benchmarks, performance- The public sector client is then required to offer restitution for variations outside the stated parameters. This risk reversal clearly serves to diminish the public sector benefits of the PPP vehicle as the public sector client both pays for the risk transfer and pays if the mitigation criteria are breached and private sector contractors have shown themselves keen to develop this mechanism to limit the application of risk transfer. The key PPP question Most countries make extensive use of private sector services in their array of public service delivery mechanisms. The key question addressed by PFMConnect is not whether private sector contractors should be employed to provide public services but the applicability of the PPP model for this purpose. In particular, are risk reversal clauses being developed excessively by contractors to the expense of the public sector clients who pay handsomely for risk transfer that is largely negated in practice by contractual provisions. PPP decision criteria Some striking examples of issues surrounding the use of PPPs and key questions to be addressed are highlighted in PFMConnect's "Risk and Reward: Issues Confronting Current PPP Developments" Development partners are showing material interest in the role of PPPs as public service delivery mechanisms. USAID have featured PFMConnect's blog in its DRG Center October 2017 newsletter. PFMConnect continues to monitor developments in the use of PPPs around the world. An extensive range of articles on PPPs is available on PFMConnect's PPP board, http://blog- Note: PFMConnect is a consultancy that supports the development of good standards of public financial management in order to improve public service delivery, extend public accountability, encourage local business development and combat corruption. Its work is principally centred on developing countries, working in cooperation with governments and other stakeholders. End
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