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Published: 08 May 2025
āļø By: B. Oyuntugs
š What Are PPP Models?
PublicāPrivate Partnerships (PPPs) encompass various collaboration structures between governments and private entities to deliver public infrastructure or services efficiently. The model chosen depends on the level of risk transfer, financing, ownership, operational control, and legal responsibility.
šļø Key Types of PPP Contract & Investment Models:
| PPP Model | Description |
|---|---|
| Concession Agreement | The private sector builds, operates, and maintains an infrastructure asset, collects user fees, and transfers the asset back to the government at the end of the contract. |
| Lease and Management Contracts | Government owns the asset, private partner operates or manages it for a fixed period. Less risk transfer, often used in utilities and healthcare. |
| BuildāOperateāTransfer (BOT) | Private party designs, finances, builds, and operates the facility for a defined time, then transfers ownership to the public sector. |
| BuildāOwnāOperate (BOO) | The private party builds, owns, and operates the facility indefinitely, usually under regulation (no transfer back to the state). |
| Joint Venture / Equity Partnership | Both public and private sectors co-invest and share ownership, profits, and risks. Often used for large-scale infrastructure or industrial projects. |
| Green PPP Projects | Focused on sustainable infrastructure ā e.g., renewable energy, waste-to-energy plants, green buildings. Governments often provide incentives or guarantees to attract investment. |
Each model varies in its balance of control, revenue generation, risk allocation, and duration.
ā»ļø Spotlight: Green PPPs
Green PPPs are emerging as a priority in response to climate commitments. These include:
- Renewable energy plants (solar, wind, hydro)
- Sustainable waste management systems
- Public transport electrification
- Energy-efficient public buildings
Governments often provide viability gap funding (VGF), tax incentives, or green bonds to support these environmentally beneficial projects.
āļø Choosing the Right PPP Model: What Matters?
- Size and scale of the project
- Public affordability and policy goals
- Private sector interest and capabilities
- Legal and institutional readiness
- Environmental and social impacts
š§ Decision-Making Frameworks in PPPs
To structure and optimize PPP project selection and evaluation, advanced modeling techniques are applied:
1ļøā£ One-Level (Single-Stage) Models
- Treat the decision-making process as a single optimization problem.
- Common in early-stage cost-benefit analysis or basic project selection.
- Focused on maximizing public value or minimizing costs under constraints.
2ļøā£ Bilevel (Two-Level) Models
- Represent hierarchical decision-making:
- Upper level: The government (leader) sets policies, rules, or frameworks.
- Lower level: The private sector (follower) reacts by optimizing its operations or investments.
- Used when strategic interaction between parties is critical.
- Useful in modeling:
- Tariff setting and concession structuring
- Investment incentives and regulation
- Environmental constraints with private response
Bilevel programming helps anticipate private responses, enabling better contract design and risk allocation.
š§© Summary: Blending Theory & Practice
| Component | Role in PPP |
|---|---|
| Contract Types | Define risk sharing, operations, and responsibilities |
| Investment Models | Impact ownership, revenue flow, and long-term partnership |
| Decision Models | Guide structuring, negotiation, and outcome prediction |
PPP is not just a procurement tool ā itās a strategic governance mechanism. The success of a PPP relies on choosing the right combination of legal, financial, technical, and institutional instruments.
š¬ Final Note:
As Mongolia and other developing countries expand their PPP portfolios, it’s essential to learn from global practices, apply context-specific modeling, and build institutional capacity for negotiation, regulation, and contract enforcement.
