PPP Knowledge Lab

Public-private partnership: features and benefits

Since 2017, Ukraine has been systematically working on sustainable development’ ensuring and the public-private partnership mechanism implementation in accordance with international best practices. The Government of Ukraine considers the PPP mechanism to be one of the main priorities for attracting investments in infrastructure development, both economic and social.

Confirmation of this can be found both in the State program for stimulating the economy to overcome the negative effects caused by restrictive measures to prevent the occurrence and spread of acute respiratory disease COVID-19 caused by coronavirus SARS-CoV-2 for 2020 – 2022 and in the new National Economic Strategy up to 2030.

Public-private Partnership (PPP) – is a long-term relationship between the state and private companies, in order to create, upgrade and further effective management of public assets and socially significant services traditionally provided by the state.

The main features of PPP are:

  • longevity of relations (from 5 up to 50 years) based on the contract
  • creation and/or development (development, significant upgrade, renovation, overhaul and technical re-equipment) of the public-private partnership asset and/or management (use, operation, maintenance) of the asset, potentially including related service management;
  • significant management responsibility of the private partner; some of the risks are transfered to a private partner for a significant part of the asset life cycle, in addition to the transfer of risks associated with development;
  • investment by a private partner in a public-private partnership asset: the private partner provides a significant portion of the financing, with the remuneration significantly linked to performance (availability and/or use) in order to reconcile the interests of both parties:
    • attracting external funds allows the state partner to implement several projects at once and pay later
    • participation in project financing encourages a private partner to
      • reduce the cost of initial investment
      • ensure the availability and proper operation/maintenance of the infrastructure
      • optimize infrastructure life cycle cost management

All investment projects that meet the features of public-private partnership should be implemented only in accordance with the requirements of the Law of Ukraine “On Public-Private Partnership” (Part 3 of Article 1 of the Law).

A concession is a form of PPP. According to the Law of Ukraine “On Concession”, this form is used in cases when the state partner/grantor transfers to the concessionaire most of the operational risk, which includes demand risk and/or supply risk. In this case, the source of the majority of the concessionaire’s income are payments from users (consumers).

How to check whether a project is a PPP?

  • The project meets the public policy priorities and Sustainable Development Goals of Ukraine for the period till 2030
  • The project envisages the creation of new and/or significant upgrades, re-equipment of old assets, and/or the socially significant services provision
  • The project envisages the use of a state and/or municipal property that is not leased and does not have a decision on privatization
  • The project envisages a long-term relationship (5-50 years)
  • The project provides mechanisms for return on investment to a private partner
  • PPP will be the most effective mechanism for project implementation

PPP asset

— existing, in particular reproducible (through the significant upgrade, restoration, overhaul and technical re-equipment) objects that are in state or municipal ownership,

— created or newly developed objects in accordance with the agreement concluded within the PPP framework.

The transfer of a PPP asset to a private partner does not cause the transfer of this asset ownership to a private partner and does not terminate the right of state or municipal ownership of such asset.

Such assets are subject to return to the public partner after the termination of the relevant agreement. (parts 2, 3 of Article 7 of the Law of Ukraine “On Public-Private Partnership”)

Other common features of PPP

  • a private company participant of the project can be created in the form of Special Purpose Vehicle (SPV)
  • financing from the private partner’s side is performed usually in the form of “project financing”;
  • the private partner receives income only (or mainly) when the asset is available;
  • As there is the link of the private partner’s remuneration on performance the technical and service requirements are also focused on the results or output specifications, and not on the initial requirements. The requirements also leave room for innovation.

PPP benefits

The PPP projects implementation maintains the priority of the state partner to control a strategically important asset that creates incentives for the infrastructure operation in the interests of society, and in general:

  • provides an opportunity to implement investment projects that are postponed due to lack of financing from the budget or for other reasons;
  • increases the management efficiency in the relevant sector of the economy;
  • ensures the world best practices introduction;
  • promotes the quality and availability of socially significant services, bringing them in line with international standards;
  • provides infrastructure’s rehabilitation, significant upgrade, and development;
  • provides effective identification, assessment and transfer of risks and responsibilities to private partners for the entire period of long-term operation of the infrastructure asset;
  • provides the attraction of long-term private financing, the capital mobilization and creates conditions for repeated attraction of the capital on infrastructure assets (according to life cycles and terms of their operation);
  • provides constant additional revenues to the budgets of different levels, increases budget efficiency;
  • provides all the benefits of project financing, including increase efficiency in terms of time, cost, volume and planning and management of the life cycle of the infrastructure rehabilitation and development project.

PPP project life cycle

The Government of Ukraine, through the Ministry of Economy, directs and ensures the standardization of the project preparation and implementation process through a transparent form of checks and balances in accordance with the procedures implemented in most partner countries.

The PPP project life cycle covers the stages from the identification and selection of PPP projects, the preparation of PPP implementation proposals, the tender to determine a private partner to the signing of the agreement and the further contract management during the PPP agreement term.

Project initiation options

Public partner initiative

– central, local executive bodies, local self-government bodies or authorities of the Autonomous Republic of Crimea, National Academy of Sciences, national branch academies of sciences, state, municipal enterprises, institutions, organizations, business associations, 100 percent of shares of which belong to the state, territorial community or the Autonomous Republic of Crimea (may involve international financial organizations and/or advisers).

Guide on how to handle a public partner initiative project

Unsolicited proposal

– entities that may be private partners under the Law of Ukraine “On Public-Private Partnership”

It is important to note that PPP projects are implemented only through the tender to determine a private partner for the project, regardless of the initiator of the project (Section IV of the Law of Ukraine “On Public-Private Partnership”).

Guide on how to handle an unsolicited proposal

PPP Project Life Cycle

by the initiative of a public partner

Stage 1
Identification and selection of PPP projects
Stage 2
Project initiation and a working group creation to prepare for project implementation
Stage 3
PPP implementation' Concept Note development and its analysis
Stage 4
Public partner's decision on the Feasibility Study preparation expediency or inexpediency
Stage 5
PPP implementation Feasibility Study development
Stage 6
PPP implementation effectiveness analysis
Stage 7
Public partner's decision on the PPP implementation or its implementation' inexpediency
Stage 8
Tender commission creation Tender documentation preparation and the decision to conduct a tender approval
Stage 9
Tender conducting to determine a private partner
Stage 10
Signing the PPP Agreement (Commercial Close) Contract Management
APMG PPP Certification Guide

The PPP Certification Program Guide, referred to as the PPP Guide is the Body of Knowledge (BoK) on public-private partnerships (PPPs), will help public officials and their advisors implement efficient, sustainable PPPs.  The PPP Guide is part of the family of CP3P credentials that, once mastered, enable PPP practitioners to achieve the title “Certified PPP Professional” under the auspices of the APMG PPP Certification Program.  The APMG PPP Certification Program, referred to as the Certification Program is an innovation of the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the Inter-American Development Bank (IDB), the Islamic Development Bank (IsDB), the Multilateral Investment Fund (MIF), the Public-Private Infrastructure Advisory Facility (PPIAF) and the World Bank Group (WBG).

People first PPPs for the UN SDGs

In 2019, the UNECE has approved the concept of Putting People First in PPPs for Sustainable Development, including Guiding Principles on People-first PPPs for the UN SDGs. In those documents, the UNECE has ratified the use of the new PPP standard, which was dubbed in materials of the UNECE Working Group since 2015, as People-first PPPs. The People-first PPPs standard is crucial to directing PPP projects towards the fulfillment of global goals via infrastructure investment and the creation of “value for people” as opposed to a mere inflow of private funding.

International E&S Standards

Environmental and Social Framework sets out the international financial organization’s commitment to sustainable development, through a Bank Policy and a set of Environmental and Social Standards that are designed to support Borrowers’ projects, with the aim of ending extreme poverty and promoting shared prosperity

Tools & Benchmarking

The World Bank, IFC, PPIAF, EBRD, UNECE as well as other organizations, has developed a number of toolkits & benchmarking related to evaluating and creating public private infrastructure partnerships. These toolkits gather together checklists, guidelines and resources for different types of projects