PublicPrivate Partnership Micha Kania Definition sectors models of

Public-Private Partnership Michał Kania Definition, sectors, models of PPP Part 1

Public-Private Partnership Definition from Polish Act of 19 December 2008 on public-private partnership • The public-private partnership consists in joint implementation of the project based on a division of tasks and risks between the public entity and the private partner Prof. Michal Kania, Silesian University in Katowice 2

Public-Private Partnership Definition Project which can be carried out on the basis of the public – private partnership construction is defined as: • (i) the construction or renovation of a building, • (ii) the provision of services, • (iii) the performance of a task, in particular equipping an asset with • devices increasing its value or utility, • (iv) or another service - combined with maintenance or management of the asset that is used for implementation of the public-private partnership project or related to it; Prof. Michal Kania, Silesian University in Katowice 3

Public-Private Partnership Definition • Public – private partnership is the form of performing public tasks by public administration with the support of private sector • Public – private partnership should be construed in a wide sense as every kind of cooperation between the public and the private sector whose aims are to serve the common good understood in a broad way or as a partnership cooperation to carry out relatively large projects which aim is to provide public services Prof. Michal Kania, Silesian University in Katowice 4

Public-Private Partnership Definition • Pursuant to European Union law, public – private partnership can be described as a long-term, contractually regulated cooperation between public authorities and the private sector to carry out public assignments, in which the requisite resources are placed under joint management and project risks are apportioned appropriately on the basis of the risk management skills of the project partners. Prof. Michal Kania, Silesian University in Katowice 5

Public-Private Partnership The characteristic features of PPP are: • long-lasting cooperation between partners • the financial risk is usually taken by private partners, the public law responsibility lies with a public institution. This responsibility regards the appropriate performance of an undertaking • the special role of a public institution is characteristic of the public – private partnership. This role consists in coordination and supervision during the whole period of cooperation Prof. Michal Kania, Silesian University in Katowice 6

Public-Private Partnership Purpose • Aims of PPP are to fulfil a wide range of public interest tasks through cooperation between public and private entities • The purpose of PPP contracts is to enable public authorities to benefit from the design, construction and management skills of private enterprises and, if necessary, from their financial resources • Current challenges for public sector are connected with combat of pandemic as coronavirus, implementation of the 4 th Industrial Revolution, 5 G, creation of Smart Cities, managing of geostrategic challenges, promotion of eco. Innovation Prof. Michal Kania, Silesian University in Katowice 7

Public - Private Partnership Sectors PPP can be used in different sectors including: • Transportation, • Energy, • Social Infrastructure, • Parking, • Toll bridge/Road, • Water/Sewer, • Airports, Ports • Student Housing, • Convention Centers, • Stadiums Prof. Michal Kania, Silesian University in Katowice 8

Public - Private Partnership Build-Operate-Transfer • Build-Operate-Transfer – is considered to be the basic public - private partnership model. • As a rule, this model seems to be the best for the majority of projects connected with satisfying the collective needs of people. • Other partnership models are - as it were - the variants of the basic model. • In this model, a contract/a number of contracts is/are concluded and under it/them the private partner undertakes to finance an infrastructure project. It is mainly the private partner who is responsible for the financing of the project. • After the private partner has done the work, he transfers the ownership of the project to the public partner. Then the public partner, who is the owner of the infrastructure, makes it available under a civil law contract to the private partner, who operates it until he recovers his costs and reaches the target profit. Prof. Michal Kania, Silesian University in Katowice 9

Public - Private Partnership Operate-Maintainance • Operate-Maintenance – in this public - private partnership model the public partner concludes a contract with the private partner under which the private partner is responsible for the maintenance and day-to-day operation of specified components of public infrastructure. • The infrastructure is owned by the public partner and the private partner operates it. It is also important that the private partner covers the costs of maintenance of the infrastructure. • At the same time the private partner receives remuneration in the form of either direct payments from beneficiaries or transfers from the public budget. Prof. Michal Kania, Silesian University in Katowice 10

Public - Private Partnership Warp Around Addition • Warp Around Addition – this cooperation model offers a possibility to improve the existing technical infrastructure owned by the public partner. • This model includes an option to enter into a contract under which the private partner will finance and carry out the specified work or provide specified services aiming at the improvement of the existing infrastructure. • The private partner will be obliged to operate the improvements and at the same time will be entitled to reap profits from his operations. • After the termination of the contract, the improvements become the property of the infrastructure owner. The advantage of this model is that it increases the quality of services connected with the infrastructure. Prof. Michal Kania, Silesian University in Katowice 11

Public - Private Partnership Build-Own-Operate-Transfer • Build-Own-Operate-Transfer – in this partnership model the private partner is granted a permit required by law to finance, carry out and then operate specified projects. • The private partner reaps profits from customer fees while operating the infrastructure he has built. After the end of the period which should be so long as to guarantee a profit for the private partner, the infrastructure is transferred to the public partner. • The advantages of this cooperation model are as follows: the resources involved are used in the most effective and efficient way and unnecessary expenses increasing public debt are not incurred. • Moreover, after the termination of the contract, the infrastructure provides the public partner with a large income. The economic risk connected with planning and execution is borne, as a rule, by the private partner. Prof. Michal Kania, Silesian University in Katowice 12

Public - Private Partnership Lease-Purchase • Lease-Purchase – in this partnership model the private partner designs, finances and carries out the project and then makes it available to the public partner, for instance by leasing it to him. • The project is carried out under strict supervision of the public partner and according to his guidelines. • The advantage is that it is possible for the public partner to quickly gain access to the required infrastructure which he could not afford under normal circumstances. • Therefore, this solution may be adopted when the purchase of fixed assets exceeds the current financial capabilities of the public partner. • The project guarantees quick access to new technologies. The risk connected with the day-to-day maintenance of the equipment used is borne by the private partner. Prof. Michal Kania, Silesian University in Katowice 13