PPP model refers to the government and private organizations, in order to provide a certain public **** goods and services, based on a concession agreement, each other to form a partnership type of cooperation, and through the signing of the contract to clarify the rights and obligations of both parties, in order to ensure the successful completion of the cooperation, and ultimately to make the parties to achieve a more favorable results than expected to act alone.
The PPP model is a financing model that has the following advantages:
Elimination of cost overruns. The public *** sector and private enterprises in the initial stage of the private sector and the government *** with the participation of the project identification, feasibility studies, facilities and financing and other project construction process, to ensure that the project is technically and economically feasible, to shorten the cycle of preliminary work, so that the project costs are reduced.
It is conducive to transforming government functions and reducing the financial burden. The government can free itself from heavy affairs and change from the past provider of infrastructure public ****services to a supervisory role, thus ensuring quality, and also reducing the pressure on the government in terms of the fiscal budget.
Facilitates diversification of investment players. Utilizing the private sector to provide assets and services can provide the government sector with more funds and skills, and promote the reform of the investment and financing system. At the same time, private sector participation in projects can promote innovation in project design, construction, and facility management processes, improve efficiency, and disseminate best management practices.
The government sector and the private sector can complement each other's strengths by utilizing the respective strengths of the governmental public*** and private institutions to compensate for each other's weaknesses. Both sides can form mutually beneficial long-term goals and can provide high quality services to the public at the most efficient cost.
The integration of all parties involved in the project into a strategic alliance plays a key role in harmonizing the different interest objectives of each party.
Reasonable risk allocation. Unlike BOT and other modes, PPP can realize risk allocation at the early stage of the project, and at the same time, due to the government sharing part of the risk, so that the risk allocation is more reasonable, reducing the risk of contractors and investors, thus reducing the difficulty of financing, and improving the possibility of successful project financing.
Wide range of applications, the model breaks through the introduction of private enterprises to participate in public **** infrastructure project organization of a variety of restrictions, can be applied to urban heating and other types of municipal utilities and roads, railroads, airports, hospitals, schools, etc..