A PPP policy includes:
- PPP program objectives
- PPP program scope
- Implementing principles
Many governments issue a PPP policy statement or document to communicate to the public and to potential investors the government’s intention to use a PPP, and how PPPs will be implemented. Other countries incorporate these elements of PPP policy within PPP laws and regulations, or guidance material. PPP policies benefit from being nested within a more comprehensive public investment or infrastructure policy framework.
1. Program objectives
Governments pursue PPP programs for different reasons. Some countries begin using PPPs in a particular sector, simply as a way to meet investment needs given fiscal constraints. For example, PPPs were first used in South Africa in the roads sector, with the specific objective of building more highways. In the Philippines, many of the first PPPs were in the power sector, where the state-owned power company contracted with independent power producers to solve a power crisis. In both cases, the use of PPPs subsequently extended into other sectors.
Many governments define broader PPP program objectives when formulating and documenting PPP policies. The choice and relative priority of these objectives depends on the government’s other policies and priorities. These can include:
- enabling more investment in infrastructure by accessing private finance;
- achieving value for money in the provision of infrastructure and public services;
- improving accountability in the provision of infrastructure and public services;
- harnessing private sector innovation and efficiency; and
- stimulating growth and development in the country.
2. PPP program scope
Many governments limit the scope of their PPP program to particular types of projects or contracts. The aim should be to focus on those projects that are most likely to successfully achieve the government’s objectives and provide value for money as PPPs. Governments define the PPP program scope by a combination of the following:
- PPP contract types: some countries define the types of contracts that are included under the PPP policy.
- Sectors: the PPP program may be limited to the sectors most in need of investment or improvements in service performance, or those in which PPPs are expected to be most successful. Some countries exclude sectors considered too politically sensitive.
- Project size: many governments define a minimum size for PPP projects implemented under the PPP framework. Smaller projects are excluded because of the relatively high transaction costs of implementing a PPP. In some cases, smaller projects are implemented, but are not subject to the appraisal and approval requirements defined in the PPP framework.
3. Implementing principles
PPP policies often set out implementing principles—the guiding rules, or code of conduct under which PPP projects will be implemented. These principles set out the standards against which those responsible for implementing PPPs should be held accountable. Principles are often supported by regulations and processes, detailing how the principles will be put into practice.