There are several types of PPP such as:
1. Service Contracts:
Under a service contract, the government (public authority) hires a private company or entity to carry out one or more specified tasks or services for a period, typically one to three years. The public authority remains the primary provider of the infrastructure service and contracts out only portions of its operation to the private partner. The private partner must perform the service at the agreed cost and must typically meet performance standards set by the public sector. Under a service contract, the government pays the private partner a predetermined fee for the service.
2. Management Contracts:
A management contract is a comprehensive service contract that covers all of the management and operational components of the public utility or service provider. Although the ultimate obligation for service provision remains with the public sector, daily management control and authority are assigned to the private partner. The private partner is paid a predetermined rate for labour and other anticipated operating costs and, often, to provide an incentive for performance improvement, the contractor is paid an additional amount for achieving pre–specified targets.
3. Lease Contracts:
Under a lease contract, the private partner is responsible for the service in its entirety and undertakes obligations relating to quality and service standards. Except for major capital investments, which remain the responsibility of the public authority, the operator provides the services at his expense and risk. In particular, the operator is responsible for losses and unpaid consumers’ debts. Given the increased burden on the private sector, the duration of a lease contract is typically longer than a service or management contract. Leases do not involve any sale of assets to the private sector.
Concession makes the private sector operator (Concessionaire) responsible for the full delivery of services in a specified area, including construction, operation, maintenance, collection, management, and rehabilitation of the system. Although the private sector operator is responsible for providing the assets, such assets often remain publicly owned and are returned to government at the end of the Concession period. The public sector is responsible for ensuring that the Concessionaire meets performance standards and the public sector’s role subsequently shifts from being the service provider to regulating the price and quality of service. The Concessionaire collects the user fees directly from the systems customers. The tariff is typically established by a regulator, but as part of the Concession arrangement the methodology for tariff adjustments will be established in advance. The Concessionaire is responsible for financing capital investments and working capital out of its resources and from the tariffs paid by the system users, but in certain cases, the government may choose to provide financing support to help the Concessionaire fund its capital expenditures.