An outline to modules and sections found on this online guide

INTRODUCTION

Find your way around infrastructure and public-private partnerships  projects with these helpful resources.

This module provides guidance on each stage of developing and implementing a PPP project—from identifying PPP candidates to managing  contracts through the project life cycle. PPP Process introduced the overall PPP development and implementation process, also shown in PPP Development and Implementation Process below. This module describes each stage of the PPP process in more detail, providing links to resources, tools, and further guidance for PPP practitioners.

Governments should only develop PPP projects that are cost-benefit justified, provide better value for money than traditional public procurement, and are fiscally responsible. However, it is difficult to assess whether a project meets all these criteria until the project is fully designed, and the decision cannot be confirmed until bids are received. This creates a dilemma—government does not want to incur the considerable costs of developing a PPP unless it knows the project meets the criteria, but cannot tell if it meets the criteria until the project has been developed.

Successful PPP programs tackle this problem through an approach where projects are screened more rigorously at successive stage of development. A project must be a good candidate for development as a PPP before any public money is spent on it. Then, the process of preparation is broken into successively more intensive and expensive phases. Before each new phase, the project must be checked to provide assurance that it is likely to meet the criteria for successful PPPs as it develops.

This module describes the iterative process for developing a PPP, as follows:

• Project identification and screening—the process of developing and implementing a PPP is typically preceded by identifying a priority public investment project, typically through a public investment planning and project selection process. During this process, some or all proposed public investment projects are screened for their potential as a PPP.
• Candidate projects that survive this screening process are then developed and appraised. Again, this is a multi-stage process—hence appraisal and structuring are shown in parallel in PPP Development and Implementation Process. Because appraisal and structuring are conceptually different,  the Reference Guide discusses appraisal first (Appraising Potential PPP Projects) and then structuring (Structuring PPP Projects). Projects will typically be partially structured, then partially appraised, then more fully structured, and more fully appraised. Different countries break up these steps differently. The result, or the business case for the project, is typically the basis for approval to proceed with the PPP transaction.
• Before the PPP transaction can be implemented, the draft PPP contract needs to be prepared—further refining the PPP structure by setting out its details in appropriate legal language. Designing PPP Contracts sets out some key elements of PPP contract design.
• Managing a PPP transaction is a complex process. A well-designed and well-implemented transaction process is central to achieving value for money from the PPP. As described in Managing PPP Transactions, this includes marketing the PPP, checking the qualifications of bidders, inviting and evaluating proposals, interacting with bidders during the process, and identifying and finalizing the contract with the selected bidder. At the end of the transaction, after bids are received and the contract agreed, government will finally know the cost and risks in the PPP project. At this point it may be checked once more to ensure it still meets the PPP criteria.
• Having executed the contract, the PPP enters the final and longest stage—managing the contract throughout its lifetime, as described in Managing PPP Contracts.
• As an alternative approach to originating and developing PPP project ideas, some governments accept unsolicited proposals for PPP projects from private companies, as described in Dealing with Unsolicited Proposals.

This guidance module is not an exhaustive resource—developing a PPP is a complex process and every project has its own peculiarities.

Public officials should hire experienced advisors when implementing a PPP project. The World Bank toolkit for hiring advisors for PPP in infrastructure (PPIAF 2001) provides extensive guidance on engaging and managing advisors.

Overall guidance on implementing PPP Projects

As described in Establishing the PPP Framework, some governments and multilateral institutions, including the World Bank, have developed detailed guidance materials, manuals, and toolkits to help PPP practitioners develop and implement PPP projects. These include sector-specific materials. The Key References table on PPP on 'Other Guidance Material and Toolkits' list some of the best PPP guidance documents. Relevant sections are included as further resources for each PPP stage described in this Reference Guide.

PPPs can be implemented on a one-off basis without any specific supporting legal and institutional framework. However, most countries with successful PPP programs rely on a sound PPP framework. Countries pioneering PPPs have built their PPP programs and frameworks together, learning by doing, and adjusting their frameworks to their needs. Governments now beginning or expanding their PPP programs can benefit from this global experience. By addressing efficiency and good-governance requirements, they can design and implement PPP frameworks that promote sound project selection, fair and competitive procurement, effective delivery of public services, and the ultimate success and sustainability of PPP programs.

The "PPP framework" consists of the policies, procedures, institutions, and rules that together define how PPPs will be identified, assessed, selected, prioritized, budgeted for, procured, monitored, and accounted for; and who will be responsible for these tasks. Establishing a PPP framework communicates government's commitment to PPPs and it fosters efficiency in the governance of the PPP program—that is, it promotes  accountability, transparency, and integrity. It ensures that selected projects are aligned with the government’s development strategy, generate the greatest economic returns for society as a whole, and do not expose the government to excessive fiscal risks. It also guarantees that consultation with stakeholders will be systematically undertaken and fair compensation awarded to those that are entitled to receive it. This generates greater private sector interest and public acceptance of PPP programs. These core principles are described in Good Governance for PPPs.

Defining the PPP framework

There is no single, model PPP framework. A government's PPP framework typically evolves over time, often in response to specific challenges facing its PPP program. In the early stages of a program the emphasis may be on enabling PPPs, and creating and promoting PPP opportunities. Once several PPPs have been implemented on an ad hoc basis, concern about the level of fiscal risk in the PPP program may be the impetus for strengthening the PPP framework. In this case, the focus may be on strengthening control over how PPPs are developed, or improving public financial management for PPPs, as for example in South Africa (Burger 2006).

Often the initial phase of this iterative process involves introducing PPP-specific institutions, rules, and procedures to ensure PPP projects are subject to similar discipline as public investment projects. Gradually, as experience with PPP grows, these PPP frameworks may re-integrate with normal public investment and infrastructure planning, procurement, and fiscal management processes, with PPPs as one option facing the same standards as others for implementing public investment projects. Maintaining the same standards will prevent PPPs from being used to circumvent standard project checks and balances or fiscal constraints.  

The best solutions to any given challenge will likely vary between countries—depending on the country's existing legal framework, investment environment, government institutions, and capacity. The PPP Framework of Chile and The PPP Framework of South Africa provide brief overviews of the PPP frameworks in South Africa and Chile—both countries recognized as having best-practice PPP frameworks.

The components of a comprehensive PPP framework typically include the following:

• Policy—articulation of the rationale behind the government's intent to use PPPs to deliver public services, and the objectives, scope, and implementing principles of the PPP program.
• Legal framework—the laws and regulations that underpin the PPP program—enabling the government to enter into PPPs, and setting the rules and boundaries for how PPPs are implemented. This can include PPP-specific legislation, other public financial management laws and regulations, or sector-specific laws and regulations.
• Processes and institutional responsibilities—the steps by which PPP projects are identified, developed, appraised, implemented, and managed, ideally within the Public Investment Management system; and the roles of different entities in that process. A sound PPP process is efficient, transparent, and is followed consistently to effectively control the quality of PPP projects.
• Public financial management approach—how fiscal commitments under PPPs are controlled, reported, and budgeted for, to ensure PPPs provide value for money, without placing undue burden on future generations, and to manage the associated fiscal risk.
• Other arrangements—how other entities such as auditing entities, the legislature, and the public participate in the PPP program, and hold those responsible for implementing PPPs accountable for their decisions and actions. The sections of this module describe each of these elements of a PPP framework, providing examples and guidance for practitioners.

In practice, these elements are closely interrelated. For example, a well-controlled process for developing PPPs requires assessing their fiscal consequences, which implies some Finance Ministry control at different stages of the project cycle. This is essential for sound public financial management of the PPP program. Comprehensive public reporting of fiscal commitments to PPPs in turn enables effective oversight of the PPP program. These linkages are highlighted throughout this module.

For more on the typical components of a PPP framework, see Farquharson et al (Farquharson et al. 2011, 15–16), and Yong (Yong 2010, 30), which both provide brief overviews. The OECD's recommendation on public governance of PPPs (OECD 2012) also sets out guiding principles for governments on managing PPPs. The recommendations cover three areas: (1) establishing a clear, predictable, and legitimate institutional framework supported by competent and well-resourced authorities; (2) grounding the selection of PPPs in value for money; and (3) using the budget process transparently to minimize fiscal risks and ensure the integrity of the procurement process. These built on earlier OECD principles for private sector participation in infrastructure (OECD 2007b).

Detailed assessments of PPP frameworks in a range of countries are available in the following:

• The Economist Intelligence Unit (EIU)'s Infrascope index publications assess the PPP environment in a set of countries to determine whether they are  ready to undertake sustainable PPPs. The variables used to assess the countries include many of the PPP framework elements described above, as well as the country's operational experience with PPPs, the availability of finance and financing support mechanisms, and the overall investment climate. The series includes EIU Infrascope index for Latin America and the Caribbean (EIU 2014b), commissioned by Inter-American Development Bank's Multilateral Investment Fund (MIF); EIU Infrascope index for the Asia-Pacific region (EIU 2014a), commissioned by the Asian Development Bank (ADB);  EIU Infrascope index for Eastern Europe and the Commonwealth of Independent States (EIU 2012), commissioned by the European Bank for Reconstruction and Development (EBRD); and the EIU Infrascope report evaluating the environment for PPPs in Africa (EIU 2015), commissioned by the World Bank.
• Irwin and Mokdad's paper on managing contingent liabilities in PPPs (Irwin and Mokdad 2010) describes the PPP approval, analysis and management approach in Australia, Chile, and South Africa, with a focus on fiscal management.
• The PPPLRC contains links to a set of tools designed by multilateral organizations to assess and improve PPP frameworks.
• The OECD Principles for Public Governance of Public-Private Partnerships (OECD 2012)—provides recommendations on how to ensure value for money through institutional design, regulation, competition, budgetary transparency, fiscal policy, and integrity at all levels of government.
• The Country Readiness Diagnostic for Public-Private Partnerships (WB 2016a)—is a World Bank tool that helps determine the status quo and compares it with best practices to determine gaps.
• The World Bank Benchmarking PPP Procurement 2017 (WB 2016b)—benchmarks the regulatory frameworks governing the PPP procurement processes in 82 economies, and evaluates these data against internationally recognized good practices.
• The Framework for Disclosure in PPP Projects (WB 2015a)—is a World Bank review of PPP disclosure frameworks and practices together with a set of recommendations for a systematic structure for proactively disclosing project information.

A PPP framework can be instituted in different ways. The options available typically depend on the legal system of the country, and on the norm for establishing government policies, procedures, institutions, and rules. They can include:

• Policy statement—in developed countries with a common-law tradition, PPP policy statements typically set out the rationale for, objectives, scope, and implementing principles of the PPP program, as described further in PPP Policy. Policy statements may also outline procedures, institutions, and rules by which the objectives and principles will be put into practice.
• Laws and regulations—as described further in PPP Legal Framework, civil law countries typically require legislation to enable PPPs to be pursued, and set out the rules for how PPPs will be implemented; many common law countries also introduce PPP legislation as a more binding form of commitment to a PPP framework. This can be a dedicated PPP law, a component of broader public financial management law, subordinate legislation such as executive orders, presidential decrees, regulations, or a combination.
• Guidance materials, such as manuals, handbooks, and other tools. These may be used to establish PPP procedures upfront, or developed over time to supplement policy statements or legislation, as a codification of good practice. PPP Cycle provides examples and draws from many examples of good quality guidance material from national PPP programs.

In addition to cross-sector PPP frameworks, policies or laws at the sector level can enable the use of PPPs and create a framework for PPPs within the sector. Many PPP programs use a combination of these approaches.

There is no single, internationally accepted definition of Public-Private Partnership. This Reference Guide takes a broad view of what a PPP is, defining it as:

A long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility and remuneration is linked to performance.

This definition

• Encompasses PPPs that provide for both new and existing assets and related services;
• Includes PPPs in which the private party is paid entirely by service users, and those in which a government agency makes some or all payments;
• Encompasses contracts in many sectors and for many services, provided there is a public interest in the provision of these services and the project involves long-life assets linked to the long term nature of the PPP contract.

The project functions transferred to the private party—such as design, construction, financing, operations, and maintenance—may vary from contract to contract, but in all cases the private party is accountable for project performance and bears significant risk and management responsibility. PPP contracts typically allocate each risk to the party that can best manage and handle it—risk transfer to the private party is not a goal, but is instrumental for full transfer of management responsibility and for the alignment of private interests with the public interest. What is a PPP: Defining "Public-Private Partnership" provides more information on the range of contract types that constitute PPPs under this definition and the different nomenclature used to describe them.

Throughout this Reference Guide, the term “infrastructure” is used to cover the range of sectors and services for which PPPs are used. In this context, “infrastructure” encompasses economic, social, and government infrastructure—that is, the “basic physical and organizational structures” needed to make economic, social, and government activity possible (using the Oxford English Dictionary definition). How PPPs Are Used: Sectors and Services further describes the range of sectors and services for which PPPs are used.

At a minimum, a PPP will include a long-term commitment to provide infrastructure services—this implies the design and construction of infrastructure, or the renewal of existing assets, and the provision of long-term asset-maintenance. Most PPPs include additional services, including the full operation of the infrastructure when the private operator is able to commit to service quality and performance, and the procuring authority is able to define that same quality and performance. These additional services should also take place over the long term.

Practitioners can, if their projects are well-selected and their PPPs carefully structured, design and implement projects that optimize cost effectiveness and social well-being by aligning private partner profit objectives with public sector service objectives that support the public interest.

A substantial body of knowledge on Public-Private Partnerships (PPPs) has been generated across the world by a broad spectrum of practitioners from government, the private sector, international development institutions, academia, and expert advisors. This Reference Guide helps readers navigate this body of knowledge. It introduces key topics on PPP, sets out options, and directs readers to examples and references where they can learn more.

What is in the Reference Guide and Who Should Read Them

The Reference Guide is divided into three modules.  Each module begins with an introduction, providing an overall framework for the module's content, and listing any helpful overview references. The modules are divided into sections, each covering a different topic.

Using References

These references are highlighted in bold type, and followed, in parenthesis, by an author and a year, for example: ‘(Delmon 2016)’ or ‘(OECD 2015b)’, where ‘b’ differentiates between different works published in the same year by the same author. When convenient, a location within the reference will be added after a comma, such as (Delmon 2016, chapter 15). All references can be found in the Reference List. Clicking an in-text citation will route the reader to that source. 

Key references for each section will be listed at the end of the section and can alternatively be accessed through the right sidebar of each page. An example of a ‘key reference’ table is provided below. In some cases, the key reference tables are organized by subject area, within the overall topic. Readers who just want to quickly get a sense of the most important references on the topic can refer directly to these key reference tables.

Key References

• Yescombe, E.R. 2007. Public-Private Partnerships: Principles of Policy and Finance. Oxford: Butterworth-Heinemann. This book provides a comprehensive review of PPPs, including guidance to practitioners about key aspects of designing and implementing PPP policy and projects. Chapter 5 provides guidelines for public-sector appraisal of PPP projects.
• Farquharson, Edward, Clemencia Torres de Mästle, E. R. Yescombe, and Javier Encinas. 2011. How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets. Washington, DC: World Bank. This guide for public sector practitioners describes how to develop and implement a PPP successfully, by developing a marketable project and attracting the right private partners. Chapter 4 provides guidelines for PPP project selection.

The Reference Guide is not a toolkit or a step-by-step guidebook; nor does it cover the specifics of PPPs in any given country or sector. Rather, the Reference Guide aims to help government officials and other interested parties in answering following questions:

• What are PPPs, and why use them?
• What kind of policy, legal, and institutional framework is need to ensure PPPs achieve their stated objectives efficiently and effectively?
• What is the process for developing and implementing a PPP project?

To better cover the range of topics which impact PPPs, the third edition includes new sections such as stakeholder communication and engagement, environmental and social due diligence, and climate change. Additional relevant sections include municipal PPPs and private participation in fragile and conflict-affected states.

Who should use the Reference Guide?

This Reference Guide targets government officials who wish to improve their knowledge of PPPs. Other parties, including civil society organizations, private sector participants, universities, or other readers will find different parts of this Reference Guide useful at different times. The Reference Guide is part synthesis and part bibliography. As such, it may be useful for both the newcomer to the PPP area looking for a structured introduction to key PPP topics, and the expert who may find additional references in some specific area.

To download the PDF of the full version, please click here.

Who developed the Reference Guide?

The PPP Reference Guide Version 3 is a joint product of the: Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), Global Infrastructure Hub (GI Hub), the Inter-American Development Bank (IDB), Islamic Development Bank (IsDB), Organisation for Economic Co-operation and Development (OECD), United Nations Economic Commission for Europe (UNECE), United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), and the World Bank Group.

Relevant Resources

Those who wish to educate themselves on PPPs more thoroughly will find the APMG PPP Certification Program Guide a useful resource. Examples of well-formulated PPP manuals and toolkits are the South Africa PPP Manual (2004), the Caribbean PPP Toolkit (2017), and the World Bank sectoral toolkits—for instance, the toolkit on roadways (2009)

Find curated resources from the PPP Knowledge Lab below or visit the Public-Private Partnership Resource Center (PPPRC) homepage for a more comprehensive collection of resources and tools on PPPs and infrastructure.

The module provides an overview of PPPs, and discusses projects and contracts where there is a public interest in the provision of services and where the project involves long-life assets linked to the long-term nature of the PPP contract.

What is a PPP: Defining "Public-Private Partnership" outlines the variety of contract types, and the terminology used to describe them. This section also presents types of partnerships to which the definition and guidance material in this Reference Guide would generally not apply. Some of them present similitudes to PPPs, others are significantly different.

Infrastructure Challenges and How PPPs Can Help discusses opportunities brought by PPP procurement, and the pitfalls practitioners may experience. PPPs are presented not only as a way of bringing needed additional investment to public infrastructure but also as a mechanism for improving infrastructure planning and project selection. It is also a mechanism for enhancing project management and guaranteeing adequate maintenance, avoiding cycles of construction followed by persistent neglect and then high-cost reconstruction. Well-structured PPPs bring private capital for investment, private-sector expertise, and commercial management incentives needed for enhancing service provision to users.

Therefore, private sector financing provides two key functions in a PPP. First, it complements public sector financing and allows projects to go forward that otherwise would have been discarded due to fiscal constraints. Second, it creates an incentive mechanism aligning private and public interests. How PPPs are Financed describes the various finance structures utilized for PPPs, and how governments can adjust contractual provisions to the financial environment, help develop markets, mitigate risks, and enhance credit.

The resources are listed in alphabetical order. Available for download are quick snapshots of PPP/Concession Laws enacted for countries beginning from S to Z. Find more at PPP Legal Framework Snapshots (A to C) and PPP Legal Framework Snapshots (D to R) .

The resources are listed in alphabetical order. Available for download are quick snapshots of PPP/Concession Laws enacted for countries beginning from D to R. Find more at PPP Legal Framework Snapshots (A to C) and PPP Legal Framework Snapshots (S to Z).