Private-public partnerships (PPPs) for adapting and maintaining infrastructure and services

Currently, the extent to which stakeholders are involved in contractual PPPs is an understudied aspect (Nederhand and Klijn, 2019) of the successful completion of these projects. Generally, there is a need to distinguish the role of stakeholders in the project itself (e.g. infrastructure development) and their role in setting up the PPP. Stakeholders include those that are formal members of the PPP and that directly control resources and those that, despite being “external” to the project, are directly affected by it and have an interest in its success (Selim & Amr Soliman ElGohary, 2020).

Some study findings indicate that a PPP makes the stakeholder environment more complex to manage, due to the involvement of multiple relationships in a PPP procurement structure. This may create possible conflicting interests or different expectations of stakeholders involved in PPP projects. The poor management of stakeholder relationships resulted one of the main reasons for the failure of PPP projects in a global context(Jayasuriya et al., 2020). Although a lack of studies on stakeholder management within PPPs has been complained, crucial aspects for conflict prevention in PPP projects are already known. Examples are conducting extensive consultation, agreeing on and setting clear setting of agreed goals, and defining roles and responsibilities of public and private actors.Key elements of successfully managing stakeholders are summarised in the PPP Contract Management Tool of the Global Infrastructure Hub and the World Bank (Chapter 3). The tool includes a guidance for managing relationships with the private company of the PPP, with other private stakeholders, with end-users, businesses and the community, and with government agencies.

PPPs offer a potential avenue for delivering public infrastructure and services to adapt to climate change efficiently. Their success hinges on several key factors.

• Clearly defined project scope, objectives, and deliverables provide a solid foundation.
• Implementing successful PPP projects requires considerable administrative capability. This can be ensured only through suitable institutional and legal frameworks and long-lasting experience in the implementation of PPP projects. Moreover, effective governance frameworks with clear roles, responsibilities, and decision-making processes are vital for PPP success.
• Effective risk allocation, where risks are shared equitably between the public and private sectors, is crucial for project viability. This might also be a challenging factor as the risk might change over time due to climate change.
• Fostering strong collaborative relationships between partners is essential for successful project implementation as well as speaking in one voice to affected stakeholders.
• Robust financial structures, including appropriate risk management strategies, are paramount to attract private investment.
• Using MRE procedures can allow to track effectiveness of the measures and adjust ongoing projects and to generate lessons learned for future projects. Managing the performance of a private partner in PPP project is particularly important: allocation of adequate resources and clear identification of Key Performance Indicators should be ensured. Detailed guidance on performance monitoring is provided in the  PPP Contract Management Tool of the Global Infrastructure Hub and the World Bank (Chapter 3).

Challenges related to PPP are political instability, economic downturns, and complex regulatory processes that can significantly impact project implementation (e.g. timelines, costs). Insufficient understanding of rules and features of the public sector by the private investors and vice versa can hinder project development and implementation. Additionally, negative stakeholder/public perception and resistance to privatization can create obstacles.

Traditional projects can be split into lots in order to attract more bidders. PPP projects require a minimum size to justify the cost of procurement and facilitate the economies of scale that are needed for enhanced efficiency of operation and maintenance. However, the very large scope of potential projects can sometimes reduce the level of competition, as few companies generally have the financial wherewithal to submit bids. With very high-value contracts, only a small number of operators, perhaps as few as one, are able to offer all the products or services requested. This could place the contracting authority in a position of dependence (European Court of Auditors, 2018).

To overcome these challenges, careful planning, effective risk management, and strong stakeholder engagement are imperative. By addressing these factors, governments and private partners can increase the likelihood of successful PPP adaptation projects that deliver value for money and improved public services.

PPPs may offer a dual-edged approach to any adaptation project. On the one hand, they accelerate project delivery by leveraging private sector efficiency and capital. On the other hand, PPPs can introduce innovative solutions and potentially improve service quality. PPPs allow to finance projects that otherwise would not be feasible, due to limitations in public budgets.

However, these advantages come at a cost. Project expenses or maintenance costs often exceed traditional public sector models due to private sector profit margins. The complexities of contract negotiation and long-term financial commitments for governments are significant drawbacks. Additionally, the transfer of certain risks to the private sector might lead to unforeseen challenges and conflicts between the public and private partners.

The EU regulates PPPs through the use of directives, which implement and expand upon the principles and freedoms established by the EU treaties. These directives aim to make the procedures for awarding public procurement contracts transparent and open to all suppliers across the EU. Hence those suppliers can offer their services and products to public authorities throughout the EU single market.

In March 2014, two EU directives of relevance to PPPs were adopted by the EU in the area of procurement: specifically, public procurement and concessions. The Public Procurement Directive (2014/24/EU) and the Concessions Directive (2014/23/EU) reflecting the EU's wish to regulate concessions more closely (European Investment Bank, 2016). Both directives need to be transposed into national legislation. The actual implementation of PPPs is also constrained by national or subnational legal frameworks. Those may establish specific rules for contracts, limitations in the scope of application and different typologies of relationships between the public and the private sector.

The timeframe for setting up a PPP can vary significantly, depending on several factors:

• Complexity of the project: Larger, more complex projects naturally take longer to negotiate and implement.
• Regulatory environment: A clear and efficient regulatory framework can expedite the process.
• Public procurement procedures: the complexity of public procurement processes can impact timelines.
• Negotiation skills: effective negotiation between public and private partners can accelerate the process.
• Economic conditions: economic factors can influence the availability of private financing and project feasibility.

Overall, setting up a PPP can take approximately from two to five years or even longer.

PPS are usually long-term agreements. Depending on the type of project that is governed by the PPP, the lifetime ranges from 20 to 30 years, but can be longer or shorter depending on the specific project. PPPs do not only cover the construction phase a of an infrastructure. It covers  also its operation and maintenance, from which they achieve economic return through user fees or government payments.