Public-Private Partnerships (P3s)

P3s are quite different than traditional contracting-out. In a P3, the private partner is responsible for securing private financing for the project, meaning that it is the private company, and not the government, that borrows the necessary funds. The private company is then entitled to project revenues, for example user fees, and the government makes regular payments to the private company over the life of the contract.

In other words, while it is the private partner that undertakes the loan, the government does pay the entire cost of the project, but does so as contract payments instead of as loan repayments.

P3 supporters argue that because the private partner actually holds the debt, there is a greater incentive to improve efficiency, reduce costs, and complete projects quickly. They further argue that because the government's payments are contractually fixed, it is the private partner who bears the risk of cost overruns or labour shortage.

In practice, however, P3s have been more costly than traditional public financing, and governments have continued to be responsible for cost overruns, while losing flexibility and control. In addition, there have been serious concerns about quality of service, transparency and accountability in P3 deals.