Question

Pro and con of private-public partnership?

Answer 1

Private-Public Partnership :

A contractual agreement between a government body and a private company to form a partnership. Usually, P3s are meant for some public benefits and the remuneration of private entities depends upon their performance in the agreement.

Pros :

1. Better infrastructure is achieved since both private and public entities do what they do best ensuring better infrastructure than most wholly private or wholly public projects.

2. Better performance is achieved since the time of projects completion determines the profits for private partners. Usually time to completion is used as a measure of performance to further determine profits.

3. Public-private partnerships results in tax saving since a part of this partnership is public.

4. Return on investment might be better incase of projects accomplished by P3s since performances are improved and costs are reduced.

5. Risk is shared but a great or bigger portion is usually assigned to private partners to ensure better performance from them. Government also free themselves of unrealistic or challenging projects when a P3 is opted for.

6. Costs related to operations and project completion is better contained by private companies who are best at the same thus having less negative impacts on government budgets.

7. Government gets to save a lot of funds by coming up with P3s and the same funds can be moved towards other socioeconomic projects to public benefits.

8. Such partnerships may also include early completion bonuses which drives private companies to deliver better performances, higher efficiency is achieved and funds are saved.

Cons :

1. As we know, private participants anticipate a great risk in such partnerships and there has to be a reasonable remuneration which may result in increased costs for government .

2. There are, at times, very few private participants possible to accomplish a certain type of goal or project and in those cases, private participants may charge high and may not deliver as efficient performance.

3. Private participants may work on the project as the experts,in such cases, for government to calculate costs can be a difficult task and private participants may take advantage of such a situation.