Table of Contents

EXECUTIVE SUMMARY.......................................................................................................................ii
ACKNOWLEDGEMENTS......................................................................................................................v
INTRODUCTION.....................................................................................................................................1
PUBLIC PRIVATE PARTNERSHIP (PPP) MODEL...........................................................................2
PRIVATE FINANCE INITIATIVE (PFI)...............................................................................................2
VARIOUS MODELS THAT CAN BE ADOPTED WITHIN PPP ARRANGEMENTS.....................3
i. Design, Build and Operate (DBO)................................................................................................4
ii. Build, Operate and Transfer (BOT..............................................................................................4
iii. Build, Own and Operate (BOO)...............................................................................................4
iv. Build, Own, Operate and Transfer (BOOT)............................................................................4
v. Design, Build, Finance and Operate (DBFO)..............................................................................4
POTENTIAL RISKS OF PUBLIC PRIVATE PARTNERSHIP MODEL...........................................5
RECOMMENDATION AND CONCLUSION.......................................................................................5
APPENDIX A: Risk allocation in Public Private Partnership model....................................................6
APPENDIX B: Summary of various arrangements under Public Private Partnership (PPP) model.7
References..................................................................................................................................................8

Table of figures

Figure 1: Value for money (Cartlidge, 2006, p. 28)....................................................................................3

Figure 2: An ordered reference of public procurement classification (Akbiyikli, R.; Eaton, D., p. 506)....3
Figure 3: Level of risk for different procurement methods (Chege, Lucy W.; Rwelamila, P. D., 2001).....6
Figure 4: Various arrangements under Public Private Partnership model (Idrissi, n.d.)..............................7
Figure 5: various PPP arrangements and responsibilities (Idrissi, n.d.)......................................................7
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 EXECUTIVE SUMMARY

Public Private Partnerships have now become common in delivering infrastructural projects
globally. The partnering of private and public sectors has given the opportunity to produce good
quality, effective and efficient large infrastructural developments and public services (Ashworth,
2012, p. 204). The Private Public Partnership (PPP) model, various arrangements under PPP
model and recommendation have been discussed in this report.
Private Public Partnership (PPP) Model and Private Finance Initiative (PFI)

PPP is refers to as a long term contractual agreement between the public sector and private
sector to produce an infrastructural structure and/or services (Cartlidge, 2006, p. 118) while PFI
is the subcategory of PPP in which the private sector provides intensive funding services to
public projects on the basis of contractual relationship (Cartlidge, 2011, p. 193). Due to the
constraints faced in delivering infrastructural projects, the government feels incapacitated to
produce facilities on or within time and with value for money. The private sector have disclosed
participation by financing and managing public projects through joint ventures i.e. consortiums
and concession i.e. right to operate government’s facilities for an agreed period of time (Smith,
1995, pp. 213-214).

Based on the services provided, it has led to the development of different Public Private
Partnership arrangements i.e. design, build and operate (DBO) build, operate and transfer (BOT),
build, own and operate (BOO), build, own, operate and transfer (BOOT) and design, build,
finance and operate (DBFO) (Ashworth, 2012, p. 203). This has given the government the
opportunity to additional financial sources, technological advancements adopted for public
projects from private sector and among others. Even though, design, build and operate (DBO) is
common, build, own and operate (BOO) has been recommended the government procures
through this partnership model to achieve the value for money in public projects.

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 ACKNOWLEDGEMENTS
First of all, I would to express my gratitude to God, who has always been there for me even at
weakest moments and for the guidance.
In addition, a thank you to my Construction Economics Lecturer, Mr. Khambadza, who has
introduced me to the understanding of the topic, ‘Public Private Partnership model’ which was
assigned to my class as an individual assignment.
Finally, I would like expand my gratitude to all respected persons, I took help and guidance from
in preparation of my assignment. It has made it possible for me to work and provide the required
information in my assignment.

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 INTRODUCTION
The main aim of the togetherness is to increase the quality of public structures and services at
optimum levels by entrusting a project into most responsible hands while contributing to the
growth of private sector’s creativeness i.e. expertise brought in by private sector in public
projects (Akbiyikli, R.; Eaton, D., p. 506).

In Malawi, the Public Private Partnership Commission (PPPC) is responsible for developing
guidelines to assist in rolling out of PPP projects and works closely with Ministry of Finance. It
reviews and assesses the feasibility, affordability, contingent liabilities and all aspects of value
for money i.e. cost, quality and time.
In this report, we will discuss the impacts and value of delivering through the Private Public
Partnership (PPP) model in public projects and various models that can be adopted within PPP
arrangements like Design Build Finance and Operate (DBFO), etc., recommendations and
conclusion.

1
 PUBLIC PRIVATE PARTNERSHIP (PPP) MODEL
Public Private Partnership is the long term contractual relationship between the public and
private sectors to produce and manage public services or infrastructure (Cartlidge, 2006, p. 118).
The public sector as the client may be the government, local authorities, and private sector as the
service provider may be non-governmental organizations, consortium,
This arrangement gives the government the opportunity to avoid difficulties in delivering public
facilities, as it obliged to, through access to new financing sources. As cited by (Bako, 2021, p.
4) it also gives the opportunity to avoid any form of political influence i.e. corruption and
bureaucracy, and inefficiency of the project i.e. delays cost overruns.
Briefly, the following is a PPP process before a project is successfully approved: initiation,
feasibility study, tendering and procurement, contract signing and financial closure, and
performance monitoring. The success of PPP project relies on the thorough risk assessment,
proposed project’s whole life cost advice and procurement advice to meet the particular needs of
the proposed infrastructural projects. This determines the project’s management and risk
allocation (Cartlidge, 2006, p. 118). On the contrary to accepted procurement routes, the public
sector in collaboration with private sector become responsible for the infrastructure development,
risk and cost management. Sometimes a government may privatize i.e. transfer of existing assets
to represent its part of contribution to the project (Ashworth, 2012, p. 202)

For instance, one of the main airports in Malawi, Chileka International in Blantyre was
liquidated in 2012 due to financial problems and became subject to private investment. In early
2014, Air Malawi, the state-owned national airline, was transformed into Malawi Airlines under
a public-private partnership between Ethiopia Airlines, the government of Malawi and other
Malawian partners i.e. 49%, 20% and 31% shareholding respectively and it was announced that
Chinese investment of $250 million was assigned to fund through the construction of Chileka
International Airport (CGD, 2022).
This procurement process brings the private and public sectors together and enhance great
participation towards the great economic development of a country as a whole. In accustomed
procurement routes e.g.: traditional procurement route, the client i.e. public sector is responsible
for the structure’s development, financing and all associated risks while in PPP model, the
private sector takes on all the responsibilities upon contractual agreement (Akbiyikli, R.; Eaton,
D., p. 505)

PRIVATE FINANCE INITIATIVE (PFI)

This is a subcategory of the PPP model, in which the private sector provides the intensive
funding services contracted by the public sector to produce public services (Cartlidge, 2011, p.
193). The private sector delivers the value for money (see Figure 1) to public sector by
subjecting itself to huge procurement costs, which are not be affordable by the government at
that particular time. (Cartlidge, 2011, p. 194). This arrangement eliminates the actual

2
privatization of public existing services and the need to increase public funding through taxation.
(Cartlidge, 2011, p. 195).

Figure 1: Value for money (Cartlidge, 2006, p. 28)

VARIOUS MODELS THAT CAN BE ADOPTED WITHIN PPP

ARRANGEMENTS
According to (Akbiyikli, R.; Eaton, D.), the figure below illustrates a broad range of
procurement routes ordering from routes in public sector is responsible for all processes in
structural development to other end, where the private sector assumes all these responsibilities.
In between, the risks and responsibilities are shared between the sectors thus the public private
partnership. There are various concession agreements under PPP model depending on the
services, the public sector may contract the private sector to provide and are as follows: design,
build and operate (DBO) build, operate and transfer (BOT), build, own and operate (BOO),
build, own, operate and transfer (BOOT) and design, build, finance and operate (DBFO)
(Ashworth, 2012, p. 203). The arrangements have been discussed below.

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Figure 2: An ordered reference of public procurement classification (Akbiyikli, R.; Eaton, D., p.
506)

i. Design, Build and Operate (DBO)

In this arrangement, the private sector is responsible for financing, building, operation and
maintenance of the facility on contractual basis. After construction, the government buys the
facility from the private sector at an agreed price thus gaining ownership of the facility (Chege,
Lucy W.; Rwelamila, P. D., 2001, p. 4).

ii. Build, Operate and Transfer (BOT)

In this initiative, the private sector finances, designs, builds and operates the building or place
hence leaving the public sector, as the client, is unaffected by direct cost risks. Upon completion
of construction, the legal ownership of the facility is transferred to the government. Thereafter,
the government grants use of the facility to the private sector for an agreed period of time to
cover for its debts, expenses, contributions and agreed profits by providing the services which
may be bought by government or sold to the public. This is arrangement is found to be suitable
for projects that are guaranteed to generate revenues and yield satisfaction in its cash-flow e.g.:
toll gates. After the agreed period of operation, the facility is transferred to government with
repayment and in a good operating condition (Akbiyikli, R.; Eaton, D., pp. 506-508).

iii. Build, Own and Operate (BOO)

This arrangement is similar to BOOT procurement route. The only difference is that, the private
sector owns the facility for an indefinite period of time. The government only falls into
agreement to acquire its services through payment for a fixed period of time (Chege, Lucy W.;
Rwelamila, P. D., 2001, p. 4).

iv. Build, Own, Operate and Transfer (BOOT)

This is another contractual method that is closely related to build, operate and transfer (BOT)
method and yet different. The exception is that, private sector owns and operates the facility for

4
an agreed period of time. After the agreed period of time, the ownership and rights to use are
transferred to the public sector i.e. government (Akbiyikli, R.; Eaton, D., p. 508).
v. Design, Build, Finance and Operate (DBFO)
This is a contractual relationship under PPP where by the private sector is responsible for
project’s design, funding, construction, operation and all associated risks. Similarly, the private
sector owns and operates the service providing facility for a contractual period of time to cover
for its expenses and agreed profit. Thereafter, the facility is handed over to the government
including the operating rights.

POTENTIAL RISKS OF PUBLIC PRIVATE PARTNERSHIP

MODEL
The most potential risks that may be associated with Public Private Partnership (PPP) model are
fiscal risks i.e. fluctuations, changes in exchange rate, project running for too long, etc. and
difficulties i.e. need to purchase machinery, need for expertise, etc. in identifying huge
uncertainties i.e. cost overruns and delays, due to the nature and complexity of the projects. This
can be remedied through negotiation of the contract to deal with the contingencies or
termination. (WBG, 2020).

RECOMMENDATION AND CONCLUSION

I, therefore, recommend the delivery of public projects through PPP model, as it offers a wide
range of arrangements that can suit the needs of any proposed project. On behalf of the
government, the private party sets good grounds of operations for revenue generation.
Specifically, the Build, Own and Operate (BOO) procurement method because its offers the
lowest degree of risk to public sector, compared to all other procurement arrangements (see
Appendix B). It also gives the opportunity to raise living standards significantly as the
government will purchase the provided services for a period of time thus, helping the private
sector realize revenue to meet needs and wants.
As addressed in the report, the Public Private Partnership model significantly outweigh most
accustomed procurement routes. The accustomed procurement routes hold the client responsible
for all financing, constructing, operating and maintaining assets, including the responsibility for
assuming all associated risk. Of which in this case, the government faces constraints on public
resources and fiscal space in attempt to produce infrastructural structures and efficient public
services. The PPP model transfers all the responsibilities and risks to the private sector, the
developer, on contractual basis for value for money and delivery of project on or within time.
The partnership provides the government with an alternative additional source of funding, hence
filling financing space thus helping the economy grow.

5
APPENDIX A: Risk allocation in Public Private Partnership model

Figure 3: Level of risk for different procurement methods (Chege, Lucy W.; Rwelamila, P. D., 2001)

6
APPENDIX B: Summary of various arrangements under Public
Private Partnership (PPP) model

Figure 4: Various arrangements under Public Private Partnership model (Idrissi, n.d.).

Figure 5: various PPP arrangements and responsibilities (Idrissi, n.d.)

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8
 References
1. Akbiyikli, R.; Eaton, D. (n.d.). A COMPARISON OF PFI, BOT, BOO, AND BOOT PROCUREMENT
ROUTES FOR INFRASTRUCTURE CONSTRUCTION PROJECTS. 505-524. Retrieved February 26,
2022, from https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.irbnet.de/
daten/iconda/CIB16757.pdf&ved=2ahUKEwic3-
nd55z2AhWjolwKHfznAaEQFnoECA4QAQ&usg=AOvVaw18U38vccDj2p0CtzedvWT2

2. Ashworth, A. (2012). Contractual Procedures in the Construction Industry, SIXTH EDITION.

London and New york: Routledge, Taylor & Francis.

3. Bako, S. S. (2021, February 20). An Overview of Pocurement Methods and Techniques for
Effective Delivery of Construction Projects. Retrieved 02 23, 2022, from
https://www.researchgate.net/publication/349466446

4. Brook, M. (2008). Estimating and Tendering for Construction Work, Fourth edition. UK:
Butterworth-Heinemann.

5. Cartlidge, D. (2006). New Aspects of Quantity Surveying Practice, Second edition. UK: Elsevier
Butterworth-Heinemann.

6. Cartlidge, D. (2011). New Aspects of Quantity Surveying Practice, Third edition. USA and Canada:
Spon Press.

7. CGD. (2022). Commonwealth Governance for Development. (Nexus Partnerships Limited)

Retrieved 02 20, 2022, from Commonwealth Governance Online:
www.commonwealthgovernancr.org/countries/africa/malawi/supporting-the-public-sector/

8. Chege, Lucy W.; Rwelamila, P. D. (2001). PRIVATE FINANCING OF CONSTRUCTION PROJECTS

AND PROCUREMENT SYSTEMS: AN INTEGRATED APPROACH. CIB World Building Congress,
Wellington, New Zealand, 1-9.

9. Idrissi, Y. S. (n.d.). Retrieved February 27, 2022, from

https://youssef-serghini.weebly.com/uploads/2/9/2/29276027/1782686_orig.png

10. Smith, A. J. (1995). Estimating, Tendering and Bidding for Construction Theory and Practice.
London: MACMILLAN PRESS LTD.

11. WBG, W. B. (2020, December 4). PPPLRC. Retrieved from Government Objectives: Benefits and
Risks of PPPs: https://ppp.worldbank.org/public-private-partnership/overview/ppp-objectives