The OECD Council has approved the OECD Recommendation on Principles for Public Governance of Public-Private Partnerships (PPPs). The Principles should be helpful to policymakers as they explore the use of PPPs to make savings and deliver effective public services.
Public-Private Partnerships (PPPs) are long term agreements between the government and a private partner whereby the private partner delivers and funds public services using a capital asset, sharing the associated risks. PPPs may deliver public services both with regards to infrastructure assets (such as bridges, roads) and social assets (such as hospitals, utilities, prisons). By combining private sector innovation and financing, and sharing the risks in innovative ways, PPPs can provide much needed savings for the public sector and a fair deal for the private sector. This presents policy makers with particular challenges that should be met with prudent institutional answers, considering the economic impact of decisions: PPPs in OECD countries currently represent about 0.8 trillion USD, and there are projects in the pipeline of about equal value. Experiences from our Member countries show that it can be difficult to get value for money out of PPPs if government agencies are not equipped to manage them effectively. Moreover, PPPs can obscure real spending and make government actions un-transparent, using off-budget financing. This means PPPs are potentially risky for fiscal sustainability, possibly leading to credit rating down-grades as has happened in some OECD countries.
The Principles will help ensure that new PPP projects add value, and prevent ill-designed projects from going forward. For instance, they offer concrete guidance on when to use a PPP – not for projects using rapidly changing technology such as IT, but possibly for those using well-known, generic technology such as building roads. They focus on how to align the different parts of the public sector to ensure success: institutional design, regulation, competition, budgetary transparency, fiscal policy and integrity at all levels of government. The Principles also stress that just as much attention should be devoted to the PPP after the deal is done – i.e. during the operational stage, which can often be 20-30 years.
Public-Private Partnerships (PPPs) are long term agreements between the government and a private partner whereby the private partner delivers and funds public services using a capital asset, sharing the associated risks. PPPs may deliver public services both with regards to infrastructure assets (such as bridges, roads) and social assets (such as hospitals, utilities, prisons). By combining private sector innovation and financing, and sharing the risks in innovative ways, PPPs can provide much needed savings for the public sector and a fair deal for the private sector. This presents policy makers with particular challenges that should be met with prudent institutional answers, considering the economic impact of decisions: PPPs in OECD countries currently represent about 0.8 trillion USD, and there are projects in the pipeline of about equal value. Experiences from our Member countries show that it can be difficult to get value for money out of PPPs if government agencies are not equipped to manage them effectively. Moreover, PPPs can obscure real spending and make government actions un-transparent, using off-budget financing. This means PPPs are potentially risky for fiscal sustainability, possibly leading to credit rating down-grades as has happened in some OECD countries.
The Principles will help ensure that new PPP projects add value, and prevent ill-designed projects from going forward. For instance, they offer concrete guidance on when to use a PPP – not for projects using rapidly changing technology such as IT, but possibly for those using well-known, generic technology such as building roads. They focus on how to align the different parts of the public sector to ensure success: institutional design, regulation, competition, budgetary transparency, fiscal policy and integrity at all levels of government. The Principles also stress that just as much attention should be devoted to the PPP after the deal is done – i.e. during the operational stage, which can often be 20-30 years.
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