PPP is a form of organisation, which is used to solve public construction and facility tasks.
The core of PPP is that the public authorities find a private supplier to not only carry out a construction project, but also to operate the building. The private party will therefore not just have the responsibility for construction, but also for the subsequent maintenance and operational tasks. That is why the public party makes functional demands to a greater extent than construction demands on the private party, who then receives greater liberty of action than in usual construction and facility projects. The PPP supplier must itself find out how to ensure that the building receives the agreed functions, and how it will subsequently be operated and maintained. This means that there is a great incentive to come up with long-lasting solutions and solve the task right from the start.
A PPP project involves, among other things, thinking about financing, construction and ongoing operation and maintenance together in one and the same tender for a project. The significant investment is made by the private party, while the public party continuously pays for the task, which typically extends over a longer period, for example between 10 and 30 years.
A key challenge in PPP is that both parties must get accustomed to some other roles, than they are otherwise used to. The government party must act as the requester, and the private party shall take on the role of developer and take on the responsibility which it entails.
A means for higher efficiency
Introduction of new forms of cooperation and organisation is one of the government's means for achieving the overall objective of an efficient public sector, which can provide high quality service in the most cost-effective way. Here, PPP is one of several possible forms of organisation.
An overall economic approach to construction is one of the central objectives of the PPP model. This does not necessarily mean that a project will be cheaper overall, but that the public authorities will get more quality for their money and run less of a risk, because the private party is financially responsible for the consequences during the construction phase. The overall economic approach must therefore be achieved by the private party having a clear inducement to adopt a holistic approach to construction, operation, maintenance and energy in a long-term perspective.
Prior to a PPP project, a systematic, economic-based assessment of the risks of the project should be conducted, and the appropriate distribution of these risks between the public and the private party should take place.
Since 2004, the state developer has been obliged to carry out a systematic assessment of all construction activities with a budget of more than DKK 100 million to determine whether it would serve well to organise them as PPP projects. Such an assessment should include overall economic as well as social considerations.
You are also welcome to contact the Danish Building and Property Agency, which will be happy to advise on PPP based on our current experience.
The PPP standard model
The Danish Competition and Consumer Authority has launched a standard model for PPP for the purpose of making public authorities and private enterprises - particularly the municipal actors - better at using PPP. The Danish Building and Property Agency has contributed to the preparation of the model.
The PPP standard model is available in two variations: A model for new construction and a model for renovation. The models provide guidance and tools for implementing a project as PPP and include contracts, which can be used in the projects.