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PPP industry acronyms and definitions

While public-private partnerships all represent a joint business venture between government entities and one or more private sector companies, they are known differently across the world and can operate under slightly varied terms.

PPP or P3 – Public Private Partnership

A PPP, or, as it is commonly known in Canada and the US, a P3, is a collaboration between public government entities and private companies, whereby private sector businesses finance, build and (in some cases) operate infrastructure or services and provide facilities management through long term concession agreements. They seek to transfer risk to those best able to manage risk, the private sector, in return for payments over the length of the project (usually at least 25 years). Payment is only made if services are delivered according to the requirements of the PPP agreement.

PFI – Private Finance Initiative

Functional in Britain until around 2012, PFIs relied on the private sector to design, build, finance and operate the facility. Each PFI contract includes the repayment of capital, interest on the loan and ongoing services for the term of the contract such as maintenance and upgrading equipment, so that the building is returned to the public as new at the end of the contract. If the risks and reward of a project is believed to be passed to the private sector, it is not recorded in the government borrowing figures, and remains off balance sheet and does not show up as part of the national debt.

PF2 – Private Finance 2

PF2 is an amended form of PFI, which takes into account criticisms and concerns raised with PFI. Transparency is improved by the government entity acting as minority investor, with a stake of between 25% and 49% and the private sector partner required to share their costs and profits. Services such as cleaning , security, IT and reception have been removed from the projects and are either tendered for separately or managed directly by the public sector to obtain the most value.

MIM – Mutual Investment Model

Launched in Wales, UK in 2017, the MIM will allow the public sector to share in the profits, currently floated at around 20%, and the creation of a ‘public interest direct’ ensures the public sector has to the same information that any other contracting partner has. As with the PF2, MIM excludes small maintenance work and IT services from contracts, which will be managed directly by the public sector.