Governments need skill, capacity, and coordination to implement PPPs successfully. The private party will design, finance, build, and maintain the infrastructure, as well as provide services (or some combination thereof). However, the government remains responsible for ensuring the public service is provided to the expected level of quality, and in a way that achieves value for money. The government must choose the right project, select a competent partner, and set and enforce the parameters within which that partner operates.
To this end, many governments define processes and institutional responsibilities for PPPs—that is, the steps that must be followed when developing and implementing a PPP project, and the entities responsible for each step.
There are several steps that a government must take to implement a PPP project successfully. Defining a standard PPP process, with approvals required at key points, helps ensure these steps are taken consistently and efficiently. Standardizing the process also helps ensure that all PPPs are developed in a way that is consistent with the government’s objectives, and improves coordination between the entities involved.
Please note that the process of developing and implementing a PPP is typically preceded by identifying a priority public investment project. Potential PPP projects typically emerge from a broader public investment planning and project selection process. At some point in this process, proposed public investment projects may be screened to determine whether they may provide more value if implemented as a PPP.
Many countries have established special PPP units to enable, filter, monitor, and support projects. The specific functions of these PPP Units vary widely, along with their location within government and structure.
Other oversight agencies can also have a role in PPP project approvals:
- Planning agencies: some systems separate responsibility for planning and project appraisal from fiscal oversight, with the latter housed in a dedicated planning agency.
- Attorney general offices: may be required to approve major government contracts, including PPPs, as part of their role as the government’s legal advisor.
- Supreme audit entities: many Latin American countries also require approvals from audit entities that are independent of the executive branch of government.
These additional reviews are important checks on the quality and legality of the project appraisal and development process. However, they can also introduce delays at crucial points. Mechanisms for coordination can help, as can capacity-building to ensure these institutions are able to fulfill their roles efficiently and effectively.
Final approvals are often required by cabinet or parliament, given that PPPs bind future administrations. Jurisdictions vary as to which entity can approve a PPP. Some require legislative approval of projects, but more often, approval may come from cabinet or a cabinet-level committee, the ministry of finance, or a combination. Approval power may also depend on the size of the project, as is typically the case for other capital investments.