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Public Private Partnership | PPP in Nepal

Public Private Partnership (PPP, 3P or P3) is a frequently pronounced term in the field of infrastructure development & contract management. It is widely adopted model mainly for public service delivery. So, before diving into the concept of public private partnership, it is good to know about public service delivery & the various options available for it.

What is Public Service Delivery ?

Public service delivery is a mechanism by which public services are delivered to the public by the local, provincial or federal government.  Such services may include public education, public health, transportation facilities, irrigation, drinking water, electricity etc. A set of institutional arrangements are made by government in order to deliver the goods & service to the citizens. So, the government has duties & rights to public service which is provided by designated officials in the stipulated time frame. A responsive government must be capable to manage the efficient delivery of basic services. There may be following different modes available for development of assets & delivery of services.

Public Private Partnership

In the first model of public service delivery mention in diagram above, government alone develops infrastructures & provides services to people which quiet traditional & straight forward model. Here the revenue generated from taxpayers  is also taken by government itself. Such model may fail if the government become unable to remain active throughout the project cycle. In second model of public service delivery, government transfers entire responsibility to private sector for creating assets & providing services to the people. The drawback here is that the private entity may only adhere to their profitability & may become careless to the quality of public service delivery. So, in order to reduce such drawbacks, we enter into the third model where legal binding occurs between government & private entity for the provision of delivery of public services which is also called public private partnership.

What is Public Private Partnership ?

PPP Knowledge Lab defines public private partnership as a long term contract between a private party and a government entity, for providing a public asset or service, in which private party bears significant risk and management responsibility and remuneration is linked to performance. This is the latest model & best reliable alternative for infrastructure development in today's market.

What are the advantages of public private partnership for government & end users ?

Improved Service Delivery

By allowing both sectors to give their best, quality of service delivery gets improved. Also, the private entity is always well aware to earn most out of it providing the best facilities.

Better economic viability

Using the advantage of private sector's innovation & technology, PPP can become more economically viable. The involvement of well experienced sponsors & leaders of private sector can increase the cost effectiveness of the project. Due to the flexibility of private sectors, there will be reduced delay resulting the faster completion of project.

Inflow of private investment

PPP increases the private investment in public infrastructures & thus allows the government funds to be redirected elsewhere in the community.

Risk sharing

Construction, completion & operational risk associated with any project are shared by private party there by reducing the risk of public sector. Transferring risk to private sector can reduce the potential cost overrun of government due to unforeseen circumstances.

What are the benefits of public private partnership for private sector ?

Investment opportunity

PPP provides a secure & long term investment opportunity for private sector. Also, they are granted to obtain the remuneration for long run. Without PPP, the private entity may not have chance to work on major capital infrastructure projects.

Resource Mobilization

PPP makes optimum use of technology, people & skills available with private entity. Expertise of private sector can be utilized fully allowing them to gain more experience & knowledge in the field.

What are the demerits of Public Private Partnership ?

Increased Cost

The production cost may increase as the private sector also demands its profit for accepting risk & investing in the project. The procurement process is more costly in comparison to traditional public procurement. Also, if the PPP goes wrong, it may be very expensive for the taxpayers.

Reduced Control

Since the control gets divided between the government & private entity, there may be reduced control if any one of the party become less responsible. It may be subjected to political exposure as the government sectors also share control over it.

Complex legislation

If any unforeseen issue arises during project execution, there may be necessity of renegotiation to accommodate the contingencies. Thus, a clear legal framework is crucial.

What types of contract are done in public private partnership ?

There are several contracting model available for public private partnership based on the type of service to be delivered. The BOOT (Build-Own-Operate-Transfer) model can be taken as a example to best describe the concept. In BOOT model, there occurs legal binding between private party & government entity where private builds the facility & owns till the duration of contract. It also operates the facility & generates revenue from end users. Since, the contract duration is usually of long time frame, the private party can easily recover its investment during payback period & earns profit there after. At the end of contract, the facility is handed back to government. Likewise, there are following different models available for contracting PPP:
Build-Transfer (BT)
Build-Own-Transfer (BOT) 
Build-Own-Operate-Transfer (BOOT)
Build-Own-Operate (BOO)
Build-Transfer-Operate (BTO)
Lease-Operate-Transfer (LOT)
Develop-Operate-Transfer (DOT)

Are there any public private partnership examples in Nepal ?

PPP model is widely practiced for hydropower projects in Nepal. There are small scale initiation for urban development. Some of the national pride projects are also contracted under this model. Public private partnership policy, 2015 has been formulated to promote PPP practice in Nepal. Some of the major projects under PPP are listed below:
Hydropower Sector
    Khimti Khola hydropower project
    Chilime hydropower project
    Bhotekoshi hydropower project
    Upper Tamakoshi hydropower project
    West Seti hydropower project
Road Sector
    Kathmandu Terai fast track
    Kathmandu Kulekhani Hetauda tunnel
Airport Sector
    Nijagdh international airport
    Gautam Buddha international airport


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