What is PPP ?

What is it PPP?

Cooperation of the state and private sector for solution of the socially significant goals has a long-standing history. However, PPP became the most actual in the last tenth anniversaries. On the one hand, complication of the social and economic life makes difficult the implementation by the state of socially significant functions. On the other hand, the business is interested in new projects for investments. PPP represents an alternative of privatization of the vitally important projects and projects, which has the strategic importance.

Generally, public-private partnership (PPP) – it is a complex of modes of intermediate-term and long-term cooperation of the state and business on a mutually beneficial conditions for solution of the socially significant goals.

There are basic characteristic features of public-private partnerships:

• Intermediate-term and long-term mutual relations;

• The Sides of PPP are represented by the state and private sector;

• Interactions of the Sides of PPP are specified in the applicable contracts;

• Mutually beneficial allocation of risks, benefits, rights and responsibilities between the partners;

• Determination of the effectiveness achievement criteria by the state sector under the PPP project.

Generally, PPP suppose that not the state shall join to the projects of business, but vise versa, the state invites the business to participate in implementation of the socially significant projects.

Modes of public-private partnership:

In a general sense, there are main modes of PPP in the area of economics and state administration:

• any mutually beneficial modes of mutual relations between state and business;

• state contracts;

• lease relations;

• financial lease (leasing);

• public-private enterprises;

• production-sharing agreements (PSA);

• concession agreement.

Main types of PPP:

1. ВВО (Buy-Build-Operate) - (Приобретение-Строительство-Эксплуатация):

Transfer of the state-owned property to the private and quasi-public structure on contract terms, according to which the property should be upgraded and operated during specified distance of time. State control is carried out over a period of effect of the property transfer contract.

2. ВОТ (Build-Operate-Transfer) - (Строительство-Эксплуатация-Передача):

Property sector designs, finances and builds new facility on the basis of long-term and concession agreement and operates it during the effect of such agreement. Upon expiration of the agreement’s effect the right of property returns to the state sector, under the stipulation that this right is not transferred due to completion of a project.

3. ВООТ (Build-Own-Operate-Transfer) - (Строительство-Владение на праве собственности-Эксплуатация-Передача):

The structure of private sector receives franchise for financing, construction and operation of facility (as well as for collection of usage charges) for the specified period, upon expiration of which, the right of property returns to the state.

4. ВОО (Build-Own-Operate) - (Строительство-Владение на праве собственности-Эксплуатация):

The private sector finances, builds, owns and operates the facility or renders the service on the basis of life tenancy or lease. State limitations are specified in the original agreement and by means of operation of the standing regulatory body.

5. BLOT (Build-Lease-Own-Transfer) - (Строительство-Аренда-Владение на праве собственности-Передача):

The company from the private sector receives the franchise for financing, designing, construction and operation of the leasable facility (as well as for collection of usage charges from the service consumers) for the period of lease, effecting at that the rental payment.

6. DBFO (Design-Build-Finance-Operate) - (Проектирование-Строительство-Финансирование-Эксплуатация):

The private sector designs, finances, builds and operates the new facility on the basis of long-term lease and during it period. The private sector transfers the new facility to the state sector upon expiration of lease.