Clasificación por sus sistemas de información:

Contrary to the traditional role of the government in providing infrastructure for the people, the role has in some ways been shifted to the private sector in the form of PPP. In PPP, the public sector or the government is purely the purchaser of a service provided by the private sector. This change of role was initially driven by governments trying to reduce their fiscal debt level and spending, thus leading them to utilise private sector funding in the form of capital investment (Adair et al., 2011). Furthermore, the private sector is seen as being able to deliver things efficiently in order to achieve returns as a business (Alexandersson & Hultén, 2006; Boles et al., 2013). In return, the private sector receives return from leasing payments of the built infrastructure or direct payment from the user; for example, toll charges.

Another reasons why there is no common universal definition of PPP is that PPP is a very broad generic term, embracing a wide range of partnership arrangements. These partnership arrangements are categorised according to the agreement on risk allocation, the extent of the parties’ participation, the responsibilities and ownership of the infrastructure (HM Treasury, 2012). No single preferred partnership arrangement is applied to every project or development (European Commission, 2003). The application of partnership arrangements depends on the particular needs, requirements and suitability of specific infrastructure developments, as each model has its own strong and weak points. Another source of confusion is the different labels employed by different countries for similar contractual arrangements (Wang et al., 2012). This research identifies and synthesises those PPP partnership arrangements commonly used by multiple organisations for infrastructure delivery, as shown in Table 2.2. Although a variety of terms is used by multiple organisations, there are common characteristics that distinguish PPP from traditional procurement. Based on the different partnership agreements listed in Table 2.2, it can be observed that the differences between PPP and traditional procurement lies in funding sources, responsibilities and ownership of the completed infrastructure. The different partnership arrangements of PPP have been developed with different objectives in mind, so governments are not short of choices when opting for PPP. With an appropriate partnership arrangement, PPP can bring the maximum benefit to the development and the stakeholders.

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Table 2.2 – Types of Partnership Agreement

Source Partnership Arrangement Delivery Method

Eggers & Dovey (2007) for

Deloitte

Build Transfer (BT):  Also known as Design and Build (DB);

 Based on the public sector's statement of need, the

private partner will design and build the facility;

 The completed facility will be operated and maintained by

the public sector. Build Lease Transfer

(BLT):

 Based on the public sector's statement of need, the

private partner will design and build the facility;  Upon completion, the facility will be leased to the public

sector until the lease is fully paid;

 Public sector will operate the facility during the lease period;

 No additional cost for facility ownership transfer. Build Transfer Operate

(BTO):

 Also known as Design Build Operate (DBO);

 Based on the public sector's statement of need, the

private partner will design and build the facility;

 Ownership by the public sector;

 Private partner will operate the facility. Build Operate Transfer

(BOT):

 Also known as Design Build Operate Maintain (DBOM);

 Private partner is responsible for designing, constructing, operating and maintaining the facility;

 Asset will transfer ownership once contract period is complete.

Build Own Operate Transfer (BOOT):

 Private partner will be awarded grant for financing, designing, building and operating the facility;  Asset will transfer ownership once contract period is

complete.

Build Own Operate (BOO):  A private entity will be awarded authorisation for

financing, designing, building, operating and maintaining the facility;

 Ownership will remain with the private entity. Design Build Finance

Operate/Maintain (DBFO):

 Private partner is responsible for financing, designing, constructing, operating and maintaining the facility.

 Long-term agreement;

 Asset will transfer ownership once contract period is complete.

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Table 2.2 (continued) - Types of Partnership Agreement

Source Partnership Arrangement Delivery Method

United Nations (2008)

Build Own Operate (BOO):  The private partner is responsible for financing, building and operating a facility;

 Private sector owns the facility. There is no transfer of ownership of facility.

Build Own Operate Transfer (BOOT):

 A private entity will be awarded a franchise for financing, designing, building, operating the facility;

 May charge end user for use of facility;

 Asset will transfer ownership once contract period is complete.

Build Operate Transfer (BOT):

 Private partner is responsible for financing, designing, constructing and operating the facility;

 Long-term concession;

 Asset will transfer ownership once concession period is complete;

 Similar to BOOT and BLOT except the ownership of asset.

Build Lease Operate Transfer (BLOT):

 A private entity will be awarded franchise for financing, designing, building, operating leased facility;

 Charge end user for use of facility against payment of a

rent Design Build Finance

Operate (DBFO):

 Private partner is responsible for financing, designing, constructing, operating and maintaining the facility;

 Long-term agreement;

 Asset will transfer ownership once contract period is complete.

Finance only:  A private entity funds project, directly or using other

financing mechanism;

 Normally a financial institution;

 Long-term lease or bond issue.

Design Build (DB):  Private partner to design and build facility based on

specific performance requirement by the public sector.

 Turnkey basis with a fixed price

 Argued as being a typical public works contract rather than one of PPP.

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Table 2.2 (continued) - Types of Partnership Agreement

Source Partnership Arrangement Delivery Method

Fiscal Affairs Department International Monetary Fund

(IMF) (2004)

Build Own Operate (BOO):

 Private partner to design, build, own, develop, operate and manage facility based on specific performance requirement by the public sector;

 No obligation to transfer ownership to public sector;

 Variant of Design Build Finance Operate (DBFO)

Build Develop Operate (BDO):

Design Construct Manage Finance (DCMF):

Buy Build Operate (BBO):  Private sector to buy/lease an existing facility from public sector;

 Facility will be upgraded;  Private sector will operate;

 No obligation to transfer ownership to public sector. Lease Develop Operate

(LDO):

Wrap Around Addition (WAA):

Build Operate Transfer (BOT):

 Private partner to design, build and operate facility;  Transfers ownership of facility once contract period over;  Private partner may rent or lease the facility from the

public sector. Build Own Operate

Transfer (BOOT): Build Rent Operate Transfer (BROT): Build Lease Operate Transfer (BLOT): Build Transfer Operate (BTO):

The partnering arrangements listed in Table 2.2 was designed and subsequently evolved to reflect the context of a country/contracting organisation and the specific technical requirements of the project. In the UK, one of the earliest partnership arrangements was PFI (Demirag et al., 2011). According to Eaton and Akbiyikli (2005), PFI is a subset of PPP which is a generic term used for all partnerships which involve construction. Although using a different label, the elements of PFI match those of the PPP elements as described in Table 2.1. Nevertheless, given the different labels and definitions, Ismail (2009) concluded that PFI and PPP are different. However, she failed to understand that even though the labels are different, the contexts of both procurements are similar. This is supported by the explanation of HM Treasury (2008) which claims PPP as an improved version of PFI to meet new demands. Like

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PPP, PFI involves the public sector as a service purchaser from the private sector for a specified time, usually long term with pre-set payment mechanisms (Eaton & Akbiyikli, 2005). PFI is also seen as a financial scheme where private investment replaces traditional funding of traditional construction procurements by the public sector (HM Treasury, 2003). Others may debate whether PPP and PFI are two different items; however, in this research, PFI’s role as an important foundation for the creation of PPP is acknowledged. However, the research will focus on PPP and will not be used interchangeably with PFI, since according to Eaton and Akbiyikli (2005) PFI is a sub-set of PPP. In line with the definition embraced by this research in an earlier chapter, this research agrees that Design Build Finance Operate (DBFO) largely mirrors PPP as the arrangements require the private sector to design, develop, finance, maintain and operate the infrastructure over a prolonged period, in consideration of payment by the public sector or end user for the service provided. Figure 2.2 shows selected partnership arrangements with the level of private sector involvement to illustrate the changes in the public sector role under PPP.

Low Private Sector Involvement High

Figure 2.2 – Level of Private Sector Involvement

Source: Kwak, Chih, & Ibbs, (2009)

Referring to Figure 2.2, PPP has indeed changed the public procurement paradigm, encouraging the involvement of the private sector in providing infrastructure to varying degrees. Within PPP, the involvement of the private sector in funding, planning, designing, operating and maintaining an infrastructure has increased.