Payments to private parties (PPP)
#13: Payments to private parties (PPP)
Payments to private parties are long-term contractual agreements between the government and a private partner wherby the latter typically finances and delivers public services.
Payments to private parties are a form of outsourcing the challenges a state is facing. This can be justified by a state’s lack of expertise and the state's possibility to focus on its "core-responsibilities", that occurs when a problem gets passed on to a private party. The integration of a partner or the development of concerning skills would be the alternative to these payments. Both can take a long time until being indulged and generate irreversible costs for the state. The private party may be tasked with the design, construction, financing, operation, management and delivery of the service for a pre-determined period of time, receiving its compensation from fixed unitary payments or tolls charged to users.
Example: The Dutch approach to water-related crisis prevention
The geographical conditions of the Netherlands make them territory particularly prone to natural disasters related to rising ocean levels and flooding. To face these pressing challenges, the Dutch approach strongly relies on the capacity of the private sector: precautionary measures of crisis prevention such as dredging, the construction of dykes and channels, pumping stations and plants for the treatment of wastewater were achieved without a direct involvement of the State, whose sole role was to finance and to delegate such operations to private parties.
Given the public relevance of water-related security issues, water policy and management remains a core public activity, its implementation is, however, almost entirely entrusted to private enterprises.
OECD (2014). Water Governance in the Netherlands: fit for the future? OECD Studies on Water (p. 30ff) https://www.oecd.org/governance/water-governance-in-the-netherlands-9789264102637-en.htm Retrieved on 22 September 2020.