The term public-private partnership (PPP) refers to co-operation between the public and private sector established for a fixed-term and on certain conditions to meet public needs in performing construction works and providing services.
In Latvia, according to Clause 1(1) of the Law on Public-Private Partnership, the PPP refers to co-operation between the public and private sector simultaneously characterized by the following features:
a) co-operation is between one or several public partners and one or several private partners involved in the public-private partnership procedure;
b) co-operation is carried out in order to meet public needs in performing construction works or providing services;
c) it is a long-term co-operation lasting up to 30 years but even longer in the cases, when it is necessary for the purpose of a contract and deliverables based on financial and economic calculations;
d) a public and a private partner pool and use the resources available thereto (e.g. property, financial resources, knowledge and experience);
e) a public partner and a private partner share the responsibility and risks.
PPP is not a new term, since certain forms of it can be found in ancient times. In the present world, the growing number of countries view PPP as an alternative to a traditional public investment model and a solution for providing successful public services, developing and maintaining infrastructure, which is indispensable for the whole society. PPP is widely used in Great Britain, Ireland, the Netherlands, France, the USA, Canada, Australia and a range of other countries.
In the practice of EU countries, common PPP contracts involve the design, construction, maintenance and management of roads and other objects of public infrastructure, provision of waste management and heat supply etc., moreover, as can be seen from the examples above the PPP is implemented in such sectors that require considerable investment and special technical and administrative knowledge. If these services have been traditionally provided and financed by the state or municipality, i.e. a public partner, then as a result of PPP the private capital is involved to provide these services, simultaneously sharing the risks, investments and benefits related to PPP implementation between a public partner and a private partner. The public partner can thus focus on the execution of the primary functions, i.e. planning and monitoring functions.
A common feature in any PPP is the realization of value for money – the acquisition of the financial usefulness of investments along with the hand-over of respective risks, promotion of innovations and efficient management of resources. Thus the determination of value for money is one of the major components in adopting the decision on PPP implementation. Such approach is used in all countries implementing a targeted policy.